Comments on: Did Wall Street Forget About Chesapeake Energy’s Haynesville Shale Monetization?

By: The Div Guy

The Div Guy — Tue, 05 Aug 2008 14:01:00 +0000

Chad,

I started to buy some DVN at the end of the day on Monday. I enjoy your blog.

By: Chad Brand

Chad Brand — Mon, 04 Aug 2008 14:58:00 +0000

Div Guy-
I do not follow RRC but I am also a fan of DVN. It was actually the energy pick on Peridot’s 2008 Select List. I would not call it a natural gas company though, they do about a 50/50 split between NG and oil.

By: The Div Guy

The Div Guy — Sat, 02 Aug 2008 01:44:00 +0000

I have been taking a look at some of the natural gas companies. I assume you pefer CHK to DVN and RRC.

By: Chad Brand

Chad Brand — Thu, 24 Jul 2008 21:40:00 +0000

I will offer up two reasons why CHK's debt load is not something that concerns me:

1) CHK's interest expense for the last 12 months was $428 million. Not chump change by any means, I agree. However, CHK's EBITDA for the last 12 months was $4.17 billion, so I don't see how there would be a concern about covering their debt service.

Now, the commenter asserts that "ng returns to $6.00 or less." While I don't foresee NG going that low, that possibility is exactly why CHK hedges their production. It allows them to not worry about NG prices and project their ROI years ahead of time. In fact, they already have financial projections for 2008, 2009, and 2010. Their hedging program allows them to do this.

By: Anonymous

Anonymous — Thu, 24 Jul 2008 17:21:00 +0000

Seeing the good and ignoring the bad is not wise investing. There was no mention in the above article of CHK’s huge debt load and the costs of carrying that debt load.
Will CHK be able to service it’s debt load when ng returns to $6.00 or less? Will CHK be able to service it’s debt load when interest rates increase going forward? overlooking any negatives and dwelling on the positives…can be dangerous to one’s financial health.