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Strategies & Market Trends : Bosco & Crossy's stock picks,talk area

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From: drlink	2/14/2006 7:18:43 PM
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I Heard an Interesting 60 minute talk today... from Aubrey McClendon, CEO of Chesapeake Energy (CHK) Even though this board does not concern itself with mid to large cap E & P's I thought I would share some interesting insights that Aubrey shared in regards to natural gas and service companies.....and on this board we have discussed and done DD on Canadian Gas and Service equites.... 1.Equity retail investors are underinvested in E&P stocks and MISTAKENLY assume that service stocks are a safer and better investment. E & P stocks sell gas/oil that is depletive in nature while service industry is NON depletive by nature. That their will be a glut of equipment and services and day rates will level out.(Harder to find gas than build a rig) 1. He stated that basically if you total up all the costs involved, finding/ G & A etc. in the US gas costs for producer is just under $6. "Checkbook drillers will slow down their mad pace of drilling" 2. In his view Gas will bottom during next 90 days. He thinks this is healthy because he wants use of gas to grow long term.(CHK is 71% hedged for 2006 at $9.41, selling at 3.3 next year cash flow, has 15 tcf) Says he likes biz because every year you start with a new slate in the Gas business, because our max storage of about 3600bcf is not large enough to handle a conseq cold winter/hot summer. So surplus today can be major shortage just one year out. 3. VERY IMPORTANT for investors to pay attention to the contango with the futures being higher than current prices. Says wall street makes mistake selling and buying E & P's based on current commodity price instead of whats really important....the next several years. (based on current selloff, with futures rising while current month drops.. this vindicates he is right) 4. Thinks floor for Oil is $50....probably $55. Must find 100 million barrels a day, 365 days a year to stay ahead of demand...unlikely. 5. Heat of summer is more important than cold of winter. Takes 3X natural gas to cool a room than heat a room. The above was best of my recollection... Best, Dr. Link

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