Chesapeake Energy Corporation (CHK): The Right Driller To Own (And The Wrong One)

Page 1 of 2

Investors who want to get in on the fracking boom had a bandleader in Aubrey McClendon.

The founder of Chesapeake Energy Corporation (NYSE:CHK) believed from the start that fracking – cracking shale deep underground with sand and water under high pressure – could unlock vast oil and gas riches. And history has proven him right.

Chesapeake Energy (CHK)

But the bandleader is not always the right man to lead the band, and if you followed the bandleader into the oil market you’ve been burned. You need a new oil tune to play, and once I show you what can go wrong here, I’ll give one to you.

The Problem With Chesapeake

I started covering Chesapeake Energy Corporation (NYSE:CHK) regularly early in 2012, when it decided to cut east coast natural gas production and focus on more “liquid rich” deposits in Texas and Ohio.

The decision to cut production, by Chesapeake and others, and to even flare or burn away gas deposits found with liquids in North Dakota’s Bakken Field, has had the desired result. Prices have nearly doubled since early 2012, and gas is selling at nearly $4/mcf.

But this has not helped Chesapeake shareholders. That’s because, in order to get at the gas, McClendon leveraged the company to the hilt. Asset sales were insufficient to let him keep his job – he “retired” in January and is now being investigated by the SEC.

There was hope among analysts that Chesapeake Energy Corporation (NYSE:CHK)’s move against its founder would boost the stock, and it has, a little – it’s up almost 20% since the retirement was announcement. But that still leaves it below its level of a year ago, and down two-thirds from its glory days. It’s just not a gusher.

Oasis A Better Play

A better way to play is with Oasis Petroleum Inc. (NYSE:OAS).

The stock is up 21% over the last year and is rated a buy by Sterne Agee. Their acreage is in the Williston Basin, a super-set of the super-hot Bakken Shale play.

The company has enough cash to drill its best acreage, and while it carries some debt, the company is easily able to service it. Its biggest risk lies in the potential of a play called Three Forks, on the southern end of the Bakken play, where test wells to test the play’s potential are now going in. So far, however, the play has been successful.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!