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Gold/Mining/Energy : Chesapeake Energy CHK -- Ignore unavailable to you. Want to Upgrade?

To: Razorbak who wrote (461)	1/1/1999 12:23:00 PM
From: Ed	Read Replies (2) \| Respond to of 726

Razorback & Zeev Head: I'm going to jump in monday CHK for a few K shares. I've watched this stock for a long time and feel that most oil & gas Co. have just about hit bottom. Another I like is BNO, it's been holding it's own in the mid $2.00 range. and went to $3.00 yesterday. This Co. is a 8 to 10$ stock even with oil @ 14.50 rang.. The old lady that predicts weather in Crab Orchard Tn. says that the squirrels nested HIGH this Fall & the bag worms had extra thick fur on their bodies. This means look out for a long COLD late winter. Hell!! I just like to own OIL stock, makes me feel like a "BIG TEXAN" an I love the smell of it just as it comes out of the ground; an it has that salty taste to it. So if it taste like it; an smells like it; the markets got to like it.... Have a good one... "GO VOLS" BILL

To: Razorbak who wrote (461)	1/1/1999 12:35:00 PM
From: Razorbak	Read Replies (2) \| Respond to of 726

Response to Paul Craig's Question About CHK from the HEC Thread ------ Also OFF TOPIC (CHK) Razor and Zeev... Happy New Year and a Fulfilling Season of Spiritual Awareness <ggg... got the line from a mechanic's answering machine>... As both of you may be aware, I started an E&P company in Alaska in 1993. Acquired some very favorable leases but never secured risk capital for drilling. Sold the leases in April 1997. I reviewed CHK carefully before that time as a possible JV partner. The article in Forbes a couple of years ago re: CHK concerned me. Given their strategy at that time and the subsequent commodity markets, it doesn't surprise me that their stock is trading at the current level. Other than the stock being so low, what makes you think this may be a good investment today? Are you buying long-term or just a short-term deadcat bounce? Just curious about your strategy. Again, happy new year. Paul L. Craig ------ Paul: Happy New Year to you, too. I hope it proves profitable for both of us. Rather than clutter up the HEC thread with off-topic posts, I decided to answer your question here. Hopefully this will generate a little more discussion on a relatively inactive thread. FYI, I started following CHK after it's plunge from the 30's in 1996 to just around 9 in mid-1997, primarily hoping for a DCB (e.g., like my interest in Abacan). As you may know, I love to bottom-fish, especially in this industry, and there are lots of candidates out there right now, as opposed to the 1996-97 time period. The more I studied CHK, though, the more uncomfortable I became about their viability. The company's accounting practices related to Proven Undeveloped (PUD) reserves was always suspect within industry circles, especially during the high-flying, "darling of the Street" days. The Forbes article you referenced just pointed out that simple fact to the entire world. From my perspective, I have yet to meet a single person in the industry that felt comfortable with the bet that Aubrey McClendon made on the LA chalk. (Note: I said "in the industry"; not "on Wall Street". <g>) In hindsight, the short reserve life of the Austin chalk properties proved to be a monumental obstacle to overcome. Unfortunately, Aubrey bet the farm on the LA chalk, and he lost. The consequences of his risky bet forced him to incur huge debts to acquire some longer-lived reserves to balance out his portfolio. Now the company's biggest problem is it's debt burden, underscored just a few weeks ago when the Board of Directors authorized a suspension of the $4m quarterly cash dividend on the 7% convertible preferred stock. biz.yahoo.com According to the company press release, "Based on [a] cost structure of $1.24 per mcfe, Chesapeake believes it will generate a cash flow margin in the top quartile of its peer group." But that's obviously before the debt burden is repaid, otherwise the agencies would not have cut the company's debt ratings. IMO, the recent Moody's report (downgrade) was a concise, but insightful analysis of the company's current problems. Therefore, IMHO, any cogent discussion on the company's future outlook should probably use that as a starting point... biz.yahoo.com IMO, from a purely technical perspective, the stock may appear to be a steal at under $1/share, but that price should not be considered in a vacuum. It must be considered in relation to book equity, which is zero. From a purely fundamental perspective, one must believe two things before investing in CHK today: (1) that commodity prices have truly bottomed, and (2) that McClendon's management and technical personnel can truly deliver on their short-term objectives. Obviously, the Street has its doubts, but that doesn't mean that there is a good trading opportunity before us driven by mostly technical factors. Apparently Zeev has based his decision to buy yesterday on a combination of technical factors (i.e., volume explosion) and a contrarian perspective on the industry & company-specific fundamentals. Knowing Zeev's track record as a trader, I believe the odds are 60%/40% that he'll make a profit in the short term. I wish him the best of luck, and I will closely monitor his progress looking for a good entry point for myself. I hope that answers your question. Comments/praise/flames from the rest of the thread are always welcome. (Let's liven up this joint! <g>) Best of luck in the New Year. Razor