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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: a.handbag. who wrote (123761)	8/28/2009 11:16:08 PM
From: Think4Yourself	2 Recommendations Read Replies (1) \| Respond to of 206223

If you look at the balance sheets for a lot of the companies, you will see a lot of debt and not a lot of cash. If prices stay below total production costs for very long, a lot of the companies are going to go under. Take Chesapeake Energy as an example. over $13 billion in debt and a little over a half billion cash (probably less now). They have to service that debt and continue exploration and/or acquisitions, which means they have to sell product even if it's at a loss. They will make up for lost revenue by producing more, further depressing prices. Lots of E&P companies in that position, but Chesapeake has a large amount of unhedged NG. Methinks they are in big trouble at the moment. Linn Energy is another one. Cramer was pumping this one hard about two weeks ago, citing the large dividend. The company has over $1.6 Billion in debt and 27.1 million cash (again, probably less now). Anyone think that large dividend Cramer was just touting is safe? This could get real ugly. I started trying to identify and short the E&P's who don't have large shale holdings, and/or have large quantities of unhedged NG, but the analysts did my job for me. They are out there right now pumping those exact companies as hard as they can, telling everyone they need to buy those companies. Interesting that it's shortly before what is likely to be the worst earnings season for those companies in a decade. from CHK's most recent 10Q Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 (Adjusted) (Adjusted) Average Sales Price (excluding all gains (losses) on derivatives): Natural gas ($ per mcf) $ 2.68 $ 9.73 $ 3.06 $ 8.70 Oil ($ per bbl) $ 53.59 $ 119.81 $ 45.19 $ 107.13 Natural gas equivalent ($ per mcfe) $ 3.21 $ 10.54 $ 3.43 $ 9.43