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.

Bossier Shale, Don’t get it confused with The Haynesville Shale!

The Bossier Shale could potentially affect the value of thousands of acres of land already held by Independent Oil and Gas Produces such as Petrohawk (HK) and Chesapeake (CHK). The Bossier Shale is an entirely separate geological play, in the same geographical area of the Haynesville shale, that is producing a lot of Nat Gas. Does this mean the supply held in this region is twice as much as already calculated? Does this make the Leaseholds twice as valuable? Or could this be the supply that floods the market and depress an already historically low price? This could also ruin the value of both companies by futher saturating the market with new Natural Gas supplies. Massive Underground Storage Facilities have record inventories due to production increases from unconventional shale plays. A new Technology in Drilling called "fracking" is opening up shale gas plays across the country. The Haynesville Shale is said to be the largest gas find in the lower 48 states.
All the players in this shale seem to be tapping into it. They are releasing their results but have not seemed to bolster the news with much fanfare. There has been a lot of insider stock buying going on across the industry. Future Options are bullish on Petrohawk (HK) partly because of the under-valuation of the company and its potential as a takeover target by cash rich oil and gas giants. Chevron recently announced it takeover of Atlas energy. Carl Ichans has announced that he had purchased a minority interest in Chesapeake (CHK). It could be a value play on his part or he might be taking an environmental stand. Either way benefits all the Natural Gas producers. Even the depressed price on Nat Gas has not slowed down drilling to protect leaseholds. That could be interpreted that that is a strong indication that these companies are confident in their futures.