CHK - Chesapeake Energy

[Myth465]

Does he really have a choice about being done. He has only stopped for 2 reasons. 1 no more big land plays out there, 2 the market wont give him the trust / capital to keep acquiring...

[Sea Island]

The Permian will fetch some serious cash. The Miss JV will as well, but it would be worth more proved out. Giving up oil assets and holding on to gas will be more profitable, but still stinks. I am long term bearish on nat gas, so giving up oil while worth while in this setting isnt great long term. They should focus on selling or spinning off in whole the none oil and gas assets. The drilling rigs, frac equipment, and pipelines / midstream assets should be sold because they will fetch cash, and the market for these is likely still quite good.

 

I would sell the Permian, and most of the none core assets. I have always found the CHK story a bit too complex. Aubrey also seems to want it all, and has wanted to keep most of his empire. Now against the wall things will be sold, but the timing is a bit off. If he was focused on shareholders, he wouldnt have leveraged up the company, and moved into so many spaces. I just dont see downside protection from him.

 

It would be worth more if proved out but as management pointed out on the call they can't afford do it and they don't need to do it. The only reason we know that there aren't any more big land plays is that Aubrey McClendon is telling us that there aren't any more big land plays. The fact is that CHK has an extremely good record of identifying new plays and selling acerage at multiples of purchase price.

 

 

[Myth465]

All of the acreage flipping has done little for CHK's shareholders.

[txlaw]

This situation keeps getting more and more crazy.

 

Letter from Noster Capital, whoever that is:

http://www.scribd.com/fullscreen/93450600

 

Jefferies-originated loan gets upsized to $4 billion:

http://www.reuters.com/article/2012/05/15/us-chesapeake-idUSBRE84E0Q920120515

 

And here's McClendon doing his thing (promoting) to try to get himself out of the boiling pot:

http://www.bloomberg.com/news/2012-05-15/chesapeake-oil-asset-may-fetch-an-extra-billion-energy.html

[txlaw]

Transcript of May 14 CC:

 

http://seekingalpha.com/article/587801-chesapeake-energy-corporation-special-call

[treasurehunt]

>> Thats why I am annoyed with Aubrey. He continues to walk that tight rope, and never thinks about the downside.

 

he said he is done and we are in now harvest mode.  ;)

I bought into CHK believing in its asset values. So far, same thesis.

 

I recall McClendon talking about getting into "harvest mode" several years ago. It appears he's still only talking about it.

 

Chesapeake may have great assets, but how sure are you that McClendon will act in a way that allows shareholders to benefit from them?

[WarrenWatsa]

No recent public filings have been made about Icahn and Chesapeake. Was it all a ruse?

[txlaw]

From the CC:

 

Domenic J. Dell’Osso

 

Yes, sure. So the way that we account for VPPs as a full-cost company, of course, is as a true asset sale. And so we take cash in, and we show the production and proved reserves as off of our balance sheet, just as we would any asset sale. What we are left with, of course, is the higher cost structure on the retained asset that we have. And so that higher cost structure is baked into our reserve report, and therefore is a function of our PV-10. And so we have all of the cost in our PV-10, which is in our standard measure calculation in our filings, of course. And that's a part of our assets calculation at the end of the day.

 

Aubrey K. McClendon

 

It's also in our LOE projection going forward, Jeff. So I'd advise all listeners to not learn about VPPs from reading the newspapers also.

 

Looks like the analysts all have the same types of questions in mind as the folks on this board.  Actually, not a bad CC from McClendon.  Particularly interesting to hear him quantify "maintenance capex."

[bmichaud]

So assuming they are not lying, their explanation for the VPPs is exactly what I was saying - reserves are not included in reserve calculations and the cost for VPP production shows up in the cost structure.

 

Now, as does everyone else, I want to know what the eff is going on with Icahn. This whole thing is either incredibly bizarre or the media is just latching onto whatever the latest rumor is.

[Zorrofan]

It's like a media "feeding frenzy".....no word from Ichan, nothing from SEAM, AM is on course to sell assets but the media is going to make it harder to get top dollar. 

 

Meanwhile CHK has increased the bridge loan to $4 billion "based on strong investor demand" and the share price drops?

 

http://www.chk.com/News/Articles/Pages/1696232.aspx

 

cheers

Zorro

[alertmeipp]

why is 4billions a worse news than 3 billions.... well sometimes, when the market gives u gifts, u just need to have cash to pick it up.. that sucks when u have spent it all..

[WarrenWatsa]

No mention of CHK in Icahn's 13F:

http://online.wsj.com/article/BT-CO-20120515-720408.html

 

Although:

...Icahn omitted some information on his holdings in the filing, an action some investment managers are permitted to take by the Securities and Exchange Commission when they're building or eliminating a position. Such "confidential treatment" prevents others from piggy-backing on their investment ideas.

 

...

 

Icahn may not be done tinkering with his holdings. Chesapeake Energy Corp. (CHK) expects Icahn to disclose soon that he has taken a significant stake in the natural-gas company, whose stock has tumbled as its been forced to raise billions of dollars to fund its operations and repay increasingly expensive loans.

[Ross812]

Has anyone been considering chkdg.pk? At a 2.57x conversion rate the break even price is ~$24. In addition, this is now yielding 8% and is senior to ~9 billion of common stock.

[PlanMaestro]

This reads like Aubrey all the way. "Big Coal" by the same author is a good book.

 

http://www.rollingstone.com/politics/blogs/national-affairs/rolling-stone-responds-to-chesapeake-energy-on-the-fracking-bubble-20120306#ixzz1oMwnx4gd

 

Even more disturbing, when I asked McClendon directly if he or his company had contributed any money to presidential candidates or their PACs during the current campaign, he said flatly that they had not. This was curious to me, because McClendon has a long history of making campaign donations, and often encourages others in the industry to give to PACs as a way to make sure their voices are heard.  So I asked him again in email a few days later: The answer was still "no." A week later, a researcher at Rolling Stone discovered that Chesapeake had indeed contributed $250,000 to Rick Perry's campaign last fall. When I asked Kehs about this, he admitted it was true. Apparently McClendon operates in a world where a quarter million dollar campaign contribution can just slip one’s mind.

[Grenville]

Thus reads like Aubrey all the way. "Big Coal" by the same author is a good book.

 

http://www.rollingstone.com/politics/blogs/national-affairs/rolling-stone-responds-to-chesapeake-energy-on-the-fracking-bubble-20120306#ixzz1oMwnx4gd

 

Even more disturbing, when I asked McClendon directly if he or his company had contributed any money to presidential candidates or their PACs during the current campaign, he said flatly that they had not. This was curious to me, because McClendon has a long history of making campaign donations, and often encourages others in the industry to give to PACs as a way to make sure their voices are heard.  So I asked him again in email a few days later: The answer was still "no." A week later, a researcher at Rolling Stone discovered that Chesapeake had indeed contributed $250,000 to Rick Perry's campaign last fall. When I asked Kehs about this, he admitted it was true. Apparently McClendon operates in a world where a quarter million dollar campaign contribution can just slip one’s mind.

 

Thanks for the link.

[txlaw]

CHK response to Rolling Stone:

http://www.chk.com/news/articles/Pages/release_20120302.aspx

[txlaw]

Vaclav Smil, Bill G's favorite writer/thinker about energy, on the nat gas revolution.

 

http://american.com/archive/2012/may/placing-the-american-gas-boom-in-perspective

[WarrenWatsa]

Longleaf makes audio comment on their position in CHK:

http://www.longleafpartners.com/commentary_news/audio

[abcd]

Chesapeake plans to sell wells in Wyoming, Colorado

 

 

Bids for the acreage are due on June 28, according to the prospectus.

 

http://www.reuters.com/article/2012/05/24/us-chesapeake-dj-idUSBRE84N15V20120524

 

 

[WarrenWatsa]

Before the WSJ, now Bloomberg...

 

 

reporting Mr. Icahn has indeed taken a stake in CHK, amounting to 4% [edit: I mean possibly more than 4%]:

http://www.bloomberg.com/news/2012-05-24/icahn-said-to-be-major-chesapeake-holder-after-buying-stake.html

 

 

Icahn’s stake in the company may amount to more than 4 percent, said the person, who declined to be identified because the holding hasn’t officially been disclosed. That would make him at least the fifth-largest investor in the second-biggest U.S. natural-gas producer, with a stake valued at more than $400 million based on Chesapeake’s closing price yesterday.

 

There are enough sources claiming he has a stake that it's hard to believe otherwise now.

[alertmeipp]

Before the WSJ, now Bloomberg...

 

 

reporting Mr. Icahn has indeed taken a stake in CHK, amounting to 4% [edit: I mean possibly more than 4%]:

http://www.bloomberg.com/news/2012-05-24/icahn-said-to-be-major-chesapeake-holder-after-buying-stake.html

 

 

Icahn’s stake in the company may amount to more than 4 percent, said the person, who declined to be identified because the holding hasn’t officially been disclosed. That would make him at least the fifth-largest investor in the second-biggest U.S. natural-gas producer, with a stake valued at more than $400 million based on Chesapeake’s closing price yesterday.

 

There are enough sources claiming he has a stake that it's hard to believe otherwise now.

 

It doesn't mean much, show me the money.

[WarrenWatsa]

Given Icahn's track record and his knowledge of the company, I think it means a fair bit, personally. I'm sure he wouldn't bother with the company unless he felt substantial upside exists from current prices despite the issues with Aubrey and a lax board. Many professional value investors simply stay far away whenever there are management issues, period. End of discussion.

 

 

Mr. Icahn isn't so hard and fast. That makes him unique. Not necessarily better, but, different.

 

 

As for "show me the money," well you will have to continue to be patient. As Charlie Munger said at the recent Berkshire shareholder meeting: “If short-term performance is something that turns you on, you should not be in this room.”

[txlaw]

Turned out to be true after all.

 

http://www.forbes.com/sites/steveschaefer/2012/05/25/icahn-pushing-for-change-with-7-6-chesapeake-stake-had-dinner-with-mcclendon/

 

Actual letter:

 

http://www.sec.gov/Archives/edgar/data/895126/000092166912000045/chkex052512.htm

[WarrenWatsa]

Carl Icahn confirmed Friday that he’s bought a 7.56% stake in badly wounded, horribly run Chesapeake Energy Corp. That gives him more than enough clout to shake Chesapeake’s boardroom to the bone, and that’s exactly what he intends to do.

 

The activist investor is demanding four of the nine seats on Chesapeake’s (NYSE:CHK)  board: two for his crew and two for Southeastern Asset Management, the company’s biggest shareholder.

 

http://www.marketwatch.com/Story/story/print?guid=97C5BE2E-A6B3-11E1-827E-002128049AD6

[Zorrofan]

First, CHK's response to Ichan's letter..

 

http://www.chk.com/News/Articles/Pages/1700014.aspx

 

Second, according to the SEC filing on CHK's website it looks like SEAM added to their holdings as well....

 

http://services.corporate-ir.net/SEC.Enhanced/SecCapsule.aspx?c=104617&fid=8206926

 

Things are about to get interesting for AM!

 

cheers

Zorro