Chesapeake Energy (CHK)

Chesapeake Energy (CHK)-is the second-largest producer of natural gas, a Top 20 producer of oil and natural gas liquids and the most active driller of new wells in the U.S.  Headquartered in Oklahoma City, the company's operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S. Chesapeake owns leading positions in the Barnett, Fayetteville, Haynesville, Marcellus and Bossier natural gas shale plays (See my Article) and in the Eagle Ford, Granite Wash and various other unconventional liquids-rich plays. The company has also vertically integrated its operations and owns substantial midstream, compression, drilling and oilfield service assets.


Bullish Ideas: 

• Expansion of Consumption: One of the reasons Natural Gas prices are at all time lows is that there is more supply than demand. Petrohawk is at an advantage because demand is growing inside of the Haynesville shale allowing Petrohawk to provide NatGas more efficiently by reducing transporting across long pipelines. AEP has recently built a Modern Natural Gas Electrical generator in Shreveport LA. 
• Natural Gas CNG Transportation Use:  Federal tax credits offered in Transportation bill.  Bossier City LA has installed first of two CNG pump stations for Vehicles. Chesapeake Oil and Gas (CHK) and city vow to move vehicles to CNG consumption.  UPS deploys new fleet using CNG and plans further expansion.  
• Environmental: Burns cleaner than conventional gasoline.  President Obama offers to back Pickens Plan during speech. Tax incentives for Nat Gas long-haul engines have been included in the latest Transportation Bill.  The reasons go on and on. Its almost impossible to list them all.  
• Environmental Activist Carl Icahn recently revealed a 5.8% stake in (CHK). This is could run the stock up in the short term as the money follows the man.  Carl Icahn has not made it clear if he is in the stock because of its potential value, or as an environmental stance.  He could also try to assert pressure on the management to continue its focus on exploration and expansion.  
• China: OK this is a new one for a lot of people but The United States could actually be an energy exporter! Two companies that I know, Cheniere Energy Partners (NYSE:CQP) and Freeport of have applications into the US Energy Dept to begin Export of Natural Gas. 
• Bossier Shale: Don't get the Haynesville shell, and the Bossier Shale confused. (Read My Article)

Bear Ideas:

• Management practices:  President Aubrey McClendon's management of the company has been questioned by many investors.  Expansion & Expansion has been the public philosophy of the company.  Some investors are suggesting that the focus should be efficiency in production until Nat Gas Prices rise.   
• Supply & Demand: Supply could continue to expand faster than demand.
• Infrastructure: There is not much room to rapidly expand pipeline transportation, Long-Distance Pipeline transmission increases production cost. LNG and CNG technology expensive and Massive in size and price.
• Nat Gas Stations: Or a lack of have made the switching to CNG impossible except for fleet vehicles in close proximity. There is a chicken and egg argument here: what comes first? (Read my Article)
• Nat Gas Vehicles: not a consumer option. Ford (F) and General Motors (GM) are pursuing development of electrical vehicles. The car companies put up a lot of money developing electrical cars and will therefore stall any other environmentally friendly vehicles from production until they have recovered the cost of these investments.
• Taxes Paid on Diesel will drop resulting in large losses of tax revenue for state and federal transportation budgets as a result of more efficient vehicles reduces government incentives to truly embrace conversion to NATGAS.