Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Chesapeake Energy Corporation (CHK) is an Opportunistic Buy

Chesapeake Energy Corporation (NYSE:CHK) has recently reported that it would sell its 50% interest in an oil and natural gas field Mississippi Lime to China’s Sinopec for more than $1 billion. Right after the announcement, Chesapeake dropped by nearly 7% to $19.10 per share. Will the sale benefit Chesapeake? Is Chesapeake an investment opportunity when its shares have recently tanked?

Chesapeake Energy Corporation (NYSE:CHK)A Second Largest Natural Gas Company in the US

Chesapeake Energy Corporation (NYSE:CHK) is considered to be the second largest natural gas producer in the US, only behind Exxon Mobil Corporation (NYSE: XOM). The company had around 19.6 trillion cubic feel equivalent of proved reserves in 15 million net acres of leasehold in total, while ExxonMobil had nearly 26.7 trillion cubic feet equivalent. Previously, Chesapeake Energy Corporation (NYSE:CHK) announced that it would sell its non-core assets to focus on profitable “core of the core” drilling area. Last year, the company sold up to $12 billion of non-core assets, and it targeted another $5 -$7 billion more this year. In the past 5 years, it has shifted its investment significantly to liquid plays for much higher returns. In 2008, only 13% of its total capital was invested in liquids, while 87% was invested in dry gas. In 2012, the situation was reversed–84% of the total capital was invested in liquids, whereas only 16% went to dry gas.

Source: Chesapeake’s presentation

The revenue from liquids has grown dramatically, accounting for 59% of the company’s total realized revenue in 2012, whereas total liquids production represented 21% of the total production.

Chesapeake Energy Corporation (NYSE:CHK) seems to be reasonable in its operation. As of December 2012, it had nearly $17.9 billion in its total stockholders’ equity, $287 million in cash, and nearly $12.6 billion in short and long-term debt. The average maturity is around 5.3 years. The majority of its debt would be due in 2017, with the principal of nearly $4.3 billion. The debt amount due this year is only $464 million.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.