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Strategies & Market Trends : Value Investing
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To: Madharry who wrote (25600)12/24/2006 8:00:49 PM
From: Spekulatius  Read Replies (1) of 78667
 
regarding CHK - i do not know all that much about the E&P industry as well but i do know how to read a cash flow statement. With respect to CHK it is clear that they are spending more than they take in, supposedly to increase their reserves. This is fine in my opinion but it turns out that the aggressive acquisitions tend to dilute shareholder value, since reserves/share are lower now than thy have been 12/31/05. Feel free to check my numbers they are from CHK's last presentation and their 10k. CHK tends to increase their sharecount by 20% annually but their reserves have been growing less than that. the increase in DDA expenses of 20%+ this year is quite remarkable considering the fact that this is a company with a long reserve life which should dampen the impact of cost increases. Since they continue to book new reserves at cost this does not hit the income statement directly (note that the book value for their reserves/share has increased even though each share represents less reserves in mcfe compared to 12/31/05.

I do not know why some officers have been buying CHK shares aggressively in spring/summer 2006 but I do know that some of their buys are underwater.I do not want to imply that CHK is a dishonest organization but i have learned to interpret cash flow statement ever since I lost some money in Worldcom stock - CHK simply does not pass the smell test.
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