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Gold/Mining/Energy : Chesapeake Energy CHK
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To: Razorbak who wrote (578)10/31/1999 9:23:00 PM
From: Ed Ajootian   of 726
 
Razor,

This certainly is no longer a stock for gamblers. There is a bit of uncertainty due to commodity prices but they now have been able to create enough cushion by reducing their operating costs so that they are not at a huge risk if gas prices go into a sustained downtrend at this point.

Looking at the preferred issue of this company very closely, and would appreciate anyone's thoughts about it.

Listened to the conference call this weekend and noticed the many calls about the preferred dividend, which is currently suspended. This is somewhat of a ticking time bomb that could go off as soon as 6 mos. from now, when their bank restrictions on payment will be met.

Wondering if the preferred is a good buy at this point. As long as prices stay as currently projected, it is a pretty good bet that the preferred shareholders will be getting a check for 5 quarters of dividends a half a year from now. That is $4.38, for a return of 13%, or 26% annualized.

Not too shabby, considering the high likelyhood that the preferred's value oughtta go up to something like $40 once dividend payments are resumed.

All this assumes the common doesn't go up a penny. If the common goes up, the preferred should go up too. It is convertible into 7.2 shares of common.

Would appreciate folks' thoughts about this.
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