Analyst Says Chesapeake's Assets Make it an Attractive Investment

By -
From Seeking Alpha:
You can tell something must be going right for Chesapeake Energy(CHK) when its stock price goes up on a day, October 9, 2012, when the overall market (SPY) goes down by approximately -1%. CHK went up demonstrably the next day with a positive overall market. A quick check indicates that CHK is seeing very positive events in many areas. In Q2, CHK, the second largest producer of natural gas in the US, had to suffer through an abyss in natural gas prices and substantially lower oil prices than in Q1 2012. On top of this, CHK was mostly unhedged in Q2.
How have things improved? US natural gas prices hit bottom in late April of Q2 2012 at $1.902/Mcf. US natural gas prices are at $3.584/Mcf as of this writing. That's about an 88% gain from the bottom in Q2 2012. It is also significantly above the breakeven point for CHK of approximately $2.70/Mcf. At least a part of the reason for the climb in natural gas prices has been the colder than normal recent temperatures and a forecast for an el Nino winter in North America (colder than normal). Unfortunately, CHK will not be able to completely benefit from this as CHK has taken on 64% hedges for natural gas production at $3.03/Mcf for Q3 and Q4 of 2012. Still the Q4 results should still show some upside for the unhedged natural gas production. The Q3 results should also show a still large improvement over Q2 results with regard to natural gas profits.
Nymex WTI Oil prices hit a near-term bottom of $77.28/barrel in late June 2012. They recovered to a near-term high of $100.42/barrel in mid-September 2012. However, they have since fallen to $91.90/barrel as of this writing. Many are saying there is near-term oversupply. Hence oil prices may fall further, especially with the seemingly continual world economic growth downgrades. In juxtaposition to the over supply issues are the many troubled political situations in the Middle East and North Africa which might send oil prices higher at any time. For Q3 and Q4 2012, CHK has liquids 31% hedged at $101.34 per barrel. This will provide a good base for good oil production earnings, and the still good oil prices will provide further good profits.
Read the rest of this analysis by clicking here.

Connect with us on Facebook and Twitter!

Popular posts from this blog

Fracktivist in Dimock Releases Carefully Edited Video, Refuses to Release the Rest

By -
Image
From Energy in Depth: There is something very strange going on along Carter Road, in Dimock, Pennsylvania, and I’m not speaking of natural gas, methane migration, contamination, litigation or even the extensive water testing there by the EPA and others.  No, I’m talking about a new “Watergate” conspiracy, complete with 18 minutes of missing tape (well, video, actually). It seems the ever-present Green Party member and  naturist   Vera Scroggins  (a/k/a  Vera Duerga ) has posted a video of Craig Sautner meeting with the EPA.  Mysteriously, the video is but 14 seconds in length, cutting off conversation in what is obviously mid-stream.  It raises a question Craig Sautner, like  Ronald Reagan in Kings Row , might have asked, “Where’s the rest of me?’  Carter Road, isn’t Kings Row, of course, (at least not until you arrive at  the mansion Scott Ely, one of the Dimock litigants, is building with his royalty money ), but there appears to be a whole lot of film editing going on there to fi
Read more

The Second Largest Oil and Gas Merger - Cabot and Cimarex

By -
Image
       Due to investor pressure, the U.S shale drillers are being pushed to improve financial and operational performance after a few years of poor returns. Even though the industry has improved its numbers, when compared to last year, investors still want more to be done for them to earn more money.      That's why two mid-tier shale drillers, Cabot and Climarex, have decided to merge in order to eliminate $100 million in annual costs, which means more money for the investors. This all-stock transaction is valued at about $7.4 billion, which is relatively high for the oil and gas sector.      The new entity will be renamed and the headquarters located in Houston, Texas. Cabot shareholders will own 49.5 percent of the new entity, and Climarex the rest.       The Cimarex-Cabot merger will address the investor's demand for a higher amount of returning cash. The initial plan is to pay a 50-cent-per-share special dividend on closing the deal while offering a quarterly variable div
Read more

Is a Strong Oil Demand Expected This Year?

By -
Image
  According to the world's largest oil traders, global oil demand is set for a rebound. Between now and the end of 2022, global consumption is expected to increase by up to 8 million barrels each day. Vitol Group, the world's largest oil trader, supports this statement.  In an interview with Bloomberg, Vitol's chief executive Russell Hardy said, "We'll need all eight cylinders to get through 2022". This, of course, is due to the lower than average demand for oil at the moment. Reopening economies and Asian markets will create a strong demand rebound by the end of this year and in 2022.  Although the demand for jet fuel will slowly increase, it will still be below average at the end of the year. Nevertheless, a surge in petrochemicals will offset the expected delay in jet fuel demand. Last year, the oil surplus reached a record of 1 billion barrels. This excess is already more than halfway drained, and experts believe it will be depleted by the third quarter th
Read more