Replies to post #217 on Chesapeake Energy Corp (CHK)

[OilStockReport]

It is a buyers market for Natural Gas right now but for those that can hold for the next couple years it will pay off IMHO.

Implementing the Plan. Chesapeake plans to implement its strategic and financial plan by:

•
Reducing drilling of natural gas wells except for those required to hold leasehold by production or to use a drilling carry provided by a joint venture partner until such time as natural gas prices rise above $6.00 per mcf;


•
Leasing and developing substantial new liquids-rich plays in which the company can acquire very large leasehold positions of 250,000 - 750,000 net acres;


•
Within one year of acquisition, selling a minority interest in a new play to recover all or virtually all of the cost to acquire the leasehold in the play and to fund a significant portion of Chesapeake’s future drilling costs in the play;


•
Accelerating drilling of liquids-rich plays until year-end 2012 when the company’s drilling capital expenditures are balanced approximately 45/55 between natural gas plays and liquids-rich plays;


•
Continuing to add proved reserves, net of monetizations and divestitures, of approximately 2.5 - 3.0 tcfe (415 - 500 million boe) annually; and


•
Accomplishing these goals without the issuance of additional equity and with an overall reduction of debt levels such that the company becomes investment grade by year-end 2012.

[OilStockReport]

Going to be a break play for into late next year IMO. Currently it sports a market cap of nearly $15 billion, but has also been hit very hard with the decline in natural gas prices.

Chesapeake is the second largest producer of natural gas trailing only Exxon (XOM). Most of the company’s production comes from the Haynesville/Bossier, Barnett, and Fayetteville shale plays, however the crown jewel of Chesapeake may be its large position in the Marcellus shale. In fact, Chesapeake is the largest leasehold owner in the Marcellus with 1.55 million net acres.

The company does have nearly $10 billion in net debt, but appears to have the collateral to back it up. Chesapeake is a profitable low cost producer that has began shifting its focus from overwhelming producing natural gas to drilling in more liquids prone plays. This combination should keep a floor under the stock price until natural gas begins to recover.