Cheasapeake Energy (IL/A): Fayetteville Shale results positive, could help Southwestern Energy as well - Goldman Sachs - June 05, 2006
We believe Chesapeake Energy's initial Fayetteville Shale (Arkansas) drilling results and conclusion that 27% of its acreage position could be productive is positive contingent on greater detail on capital costs. Greater indications that the Fayetteville is a credible development opportunity would be positive not only for Chesapeake but also for Southwestern Energy (OP/A), the latter of which we believe has the dominant quality acreage position in our view. Chesapeake has historically been somewhat cautious on its three key emerging resource areas -- the Fayetteville, the Woodford/Caney Shale in Oklahoma and the Haley Deep position in West Texas. Further evidence of success in these regions at reasonable rates of return is the key catalyst for Chespeake shares to reach an estimated $38 traditional peak value (25% upside).
Chesapeake (IL/A) has consistently shown good success in the Barnett Shale -- the company's announced upward revision to Barnett proved reserves is further evidence of that success, and the announced $932 million in acquisitions is in line with the company's strategy.
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Brian Singer, Arjun Murti. |
