Chesapeake Business Practices

[HangryHippo]

Regarding Webb over Hood, that makes a lot of sense.

Other than selling off excess property and halting their overpriced purchases, what big changes do you think we'll see come out of Burger's initiative?

[coov23]

Economists and business experts are predicting another oil and gas boom soon. Obviously, oil is still booming, but most think CNG is on the verge of a surplus shortage. Meaning, it's going to continue to rise fast. Some say 14.00 btu by next April. Wow!

Seeking Alpha

[tillyato]

Economists and business experts are predicting another oil and gas boom soon. Obviously, oil is still booming, but most think CNG is on the verge of a surplus shortage. Meaning, it's going to continue to rise fast. Some say 14.00 btu by next April. Wow!

Seeking Alpha

I would love to see $14/mcf next year, but have no idea what that guy is thinking with a prediction like that. I haven't seen anything that would warrant those kinds of prices, we will be lucky to be at $6-7/mcf by April 14 IMHO.

[Pete]

Nat Gas almost HAS to come up off the floor eventually, although Chesapeake and SandRidge themselves have played a big role in the oversupply.

Hopefully both companies can hang in there, continue tightening their belts and diversifying, then ultimately reap the benefits of their huge gas volumes.

[Bellaboo]

Last May, Natural gas contracts hit $ 1.99 per thousand. The May 13 futures contract is $ 4.04 today......

[tillyato]

I agree that natural gas has nowhere to go but up, but (I think) it will be a slow steady climb over the next decade rather than a big jump in the next couple of years. I just don't see how it would possibly get to over $10/mcf by this time next year, but certainly wouldn't complain if it did. $6/mcf in 1Q 14 would be 50% higher than today's prices, which are already significantly higher than a year ago.

[ou48A]

The switch to more electrical generation has helped NG prices recover to present levels. The increased use of NG has displaced large amounts of coal, but record amounts of coal are now being exported.
Even though there is far less drilling for dry NG there will be large amounts of NG associated with oil shale / liquids production that will be coming on line that will be impact NG prices for a considerable length of time.

As much as they reasonably can (they are very late to this part of the game) CHK and SD need to continue to become more diversified by producing more crude oil. There are still good opportunities for both in the energy transportation sector IMHO and that’s how they could reinvent their companies.

[tillyato]

As much as they reasonably can (they are very late to this part of the game) CHK and SD need to continue to become more diversified by producing more crude oil. There are still good opportunities for both in the energy transportation sector IMHO and that’s how they could reinvent their companies.

SD is at least in a good position with its (hopefully) liquids rich acreage in the Missisippi Lime. It better be rich, since SD now more or less has all of their eggs in one basket with that play. Unfortunately, as part of its divestitures CHK has been forced to sell some of its best liquids rich assets. The transition to diversification will be a longer road for CHK, but getting gas prices up to the $6/mcf level would be a huge boost for them while they are making the transition.

[ou48A]

SD is at least in a good position with its (hopefully) liquids rich acreage in the Missisippi Lime. It better be rich, since SD now more or less has all of their eggs in one basket with that play. Unfortunately, as part of its divestitures CHK has been forced to sell some of its best liquids rich assets. The transition to diversification will be a longer road for CHK, but getting gas prices up to the $6/mcf level would be a huge boost for them while they are making the transition.

I hear mixed things about the liquids rich acreage in the Mississippi Lime.

[BoulderSooner]

judge dismisses lawsuit against CHK

Judge dismisses shareholder lawsuit against Chesapeake | News OK

[Just the facts]

judge dismisses lawsuit against CHK

Judge dismisses shareholder lawsuit against Chesapeake | News OK

That's what happens when you go to court with nothing but a news article as evidence.

[ou48A]

The switch to more electrical generation has helped NG prices recover to present levels. The increased use of NG has displaced large amounts of coal, but record amounts of coal are now being exported.
Even though there is far less drilling for dry NG there will be large amounts of NG associated with oil shale / liquids production that will be coming on line that will be impact NG prices for a considerable length of time.

As much as they reasonably can (they are very late to this part of the game) CHK and SD need to continue to become more diversified by producing more crude oil. There are still good opportunities for both in the energy transportation sector IMHO and that’s how they could reinvent their companies.

To follow up on this^ post.
This discusses the NG that is associated with oil and liquids.
Because there is so much bonus NG I don’t believe we will see significant NG prices increases form where we are anytime soon. The best new hope I see for prices is if the regulators start allowing more LNG exports.


3 Regions Where Natural Gas Production Is Growing (CHK, KOG)
April 10, 2013 |

If you haven't noticed yet, natural gas prices have started to head higher. A combination of factors, including a surprisingly cold March, have led to resilient demand. As prices have inched up, two top Wall Street banks have seen enough momentum to raise their 2013 price target for natural gas. Morgan Stanley's price forecast was bumped up by 7% to $3.93 per million British thermal units, or MMBtu, while Goldman Sachs raised its forecast from $3.75 per MMBtu all the way to $4.40 per MMBtu.

That's good news for those companies in regions where natural gas production is actually growing. Overall since the end of 2011, North American dry shale gas production has risen by 9.95% to 27.2 billion cubic feet of production per day as of the beginning of this past February. This rise has been driven primarily by production growth at three big plays. Let's take a look.

Eagle Ford
While not known for natural gas, the Eagle Ford Shale has actually seen a 43.12% pop in natural gas production according to data from the Energy Information Administration, or EIA, over the past year. Most of this gas is associated with oil and liquids, as fewer companies are drilling in the dry gas window at the moment.

For example, Chesapeake Energy's (NYSE: CHK ) core acreage is in the sweet spot of the oil window. Despite that, 19% of the company's fourth-quarter production was natural gas. As Chesapeake increases its overall production, natural gas production increases as a byproduct of its liquids-focused drilling. Further, as the nation's No. 2 gas producer, Chesapeake is one of the biggest beneficiaries of higher gas prices.

Marcellus
According to the EIA, natural gas production out of the Marcellus jumped 55.28% over the past year. Top producer, Range Resources (NYSE: RRC ) , produced a total of 146 Bcf of natural gas last year. That production easily exceeded that of number two producer EQT's (NYSE: EQT ) 103 Bcf of natural gas production last year.
These two companies hold one thing in common: Both are among the lowest-cost producers of natural gas in the country, which gives them a competitive advantage to make money when most of their competitors cannot. Investors in these low-cost producers have been served well as both have returned around 40% over the past year.

Bakken
While the Bakken is known for its oil, natural gas production skyrocketed by 94.38% according to data from the EIA. Part of the reason more gas is being produced is because less of it is being flared -- instead, it's being put into pipelines. Most of this infrastructure simply didn't exist until recently and now that companies have a way to get gas to market, they're able to sell instead of flare.

The impact of this reduced flaring is clearly evident at Kodiak Oil & Gas (NYSE: KOG ) . In 2011 the company produced 1,329 MMcf of gas, but flared 807 MMcf. That's 61% of the gas! Last year the company produced 6,613 MMcf of natural gas and while it flared 3,311 MMcf, down to 50% of what was produced. Meanwhile, the overall amount of gas that hit the market jumped a staggering 533%.

Kodiak isn't the only company growing its associated gas production. Over the past two years, Continental Resources (NYSE: CLR ) has grown its overall production faster than its peers, so that it's now the top producer in the play. While its production is heavily weighted toward oil, which accounted for 72% of production, it's still growing natural gas production as a byproduct of its oil growth.

The Foolish bottom line
There's one main theme that runs throughout: Companies will produce more natural gas if it's profitable to do so. For some, that's being the low-cost producer giving them the ability to profit when others cannot. For the rest, natural gas production growth happens naturally because of its associated with more profitable oil and natural gas liquids. Given the economics of these regions, its not surprising to see this increase in natural gas production.


As the nation's second-largest natural gas producer, Chesapeake Energy is a name to watch as gas prices head higher. Not only that but energy investors would be hard-pressed to find another company trading at a deeper discount than Chesapeake Energy. Its share price depreciated after negative news surfaced concerning the company's management and spiraling debt picture. While the debt issues still persist, giant steps have been taken to help mitigate the problems. To learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy.

[tillyato]

To follow up on this^ post.
Because there is so much bonus NG I don’t believe we will see significant NG prices increases form where we are anytime soon. The best new hope I see for prices is if the regulators start allowing more LNG exports.

+1. LNG exports are the best strategy for mid term (5-10 years out) increases in NG prices in North America, and will add tens of thousands of jobs domestically along with an increase in the GDP in the hundreds of billions of dollars per year. Domestic demand alone cannot keep up with the rate of increasing supplies that will continue to be produced in the coming years. I just hope DOE approves the new construction of LNG export terminals soon, before every other major NG producing country gets a head start on us. This is one of many areas where politics in the regulation of the energy industry really hurts Oklahoma companies.

[fromdust]

Nat Gas almost HAS to come up off the floor eventually, although Chesapeake and SandRidge themselves have played a big role in the oversupply.

Hopefully both companies can hang in there, continue tightening their belts and diversifying, then ultimately reap the benefits of their huge gas volumes.

Sure Sandridge has diversified....straight to oil.

[Just the facts]

I see Chesapeake has decided that their CEO should focus primarily on the stock price.

Chesapeake Energy outlines new pay plans | News OK

The directors last week asked shareholders to approve a plan they say would tie 91 percent of executive pay to shareholder interest, with only 46 percent of the pay guaranteed.

[HangryHippo]

This seems like encouraging news for Chesapeake:

Chesapeake announces first-quarter profit | News OK

[ljbab728]

$100M worth of good new for Chesapeake.

Federal judge sides with Chesapeake Energy Corp. in bond lawsuit | News OK

A federal judge in New York sided with Chesapeake Energy Corp. on Wednesday in its dispute with a bank over the early redemption of bonds issued in 2012, a decision that could save the energy company more than $100 million.

[coov23]

Chesapeake named new CEO. The bad part? He's international vice-president of the company that bought Kerr-McGee and moved them to Houston. Yikes.

[dcsooner]

Chesapeake named new CEO. The bad part? He's international vice-president of the company that bought Kerr-McGee and moved them to Houston. Yikes.

So when does Chesapeake get bought by Anadarko? OKC will lose again in the world of Oil and Gas. When will this city learn about diversification to offset corporate moves. Once that happens ( takeover) momentum in OKC will slow. Thanks Archie

[coov23]

Hook. Line and sinker with good ole, DC. Sky is falling! If okc could only be as good as DC. What happens if the federal gov't falls there? Don't tell me that's far fetched. It's not. Especially, with the budget issues.

[Teo9969]

So when does Chesapeake get bought by Anadarko? OKC will lose again in the world of Oil and Gas. When will this city learn about diversification to offset corporate moves. Once that happens ( takeover) momentum in OKC will slow. Thanks Archie

CHK bought by a <$50B company?

[coov23]

Btw, who's Archie? You mean Aubrey? The guy that has already started another business? Oh, and okc has diversified. They've diversified a lot. Your doom and gloom bit is getting old.

[HangryHippo]

Btw, who's Archie? You mean Aubrey? The guy that has already started another business? Oh, and okc has diversified. They've diversified a lot. Your doom and gloom bit is getting old.

Archie Dunham is the non-Executive Chairman of Chesapeake Energy and the man that probably had the ultimate say in who became the new CEO. And OKC hasn't diversified nearly as much as they need to, but we're getting better in this regard. And Lawler's history is a legitimate cause for concern for some. That's fine if it worries DC. It doesn't have to worry you.

[dcsooner]

Hook. Line and sinker with good ole, DC. Sky is falling! If okc could only be as good as DC. What happens if the federal gov't falls there? Don't tell me that's far fetched. It's not. Especially, with the budget issues.

You better hope the federal government doesn't fall because last I heard Tinker AFB hires about 20K, Ft Sill is what keeps Lawton alive not to mention the alltus AFB, FAA etc

[adaniel]

Really poor understanding of what is going on here.

Kerr-McGee was sold under differing circumstances (it was a shell of its former self by the time Anadarko purchased it) and was the path chosen by their shareholders. The fact that it is the same guy means nothing. Chesapeake couldn't be sold even if it wanted to. Things have stabilized there but nobody is touching that company with a 6 foot pole. There is far more pressure to sell off assets to pay down debt and refocus their drilling program. I would frankly be more worried about any affects from that.