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

The managers of Oasis came from Burlington Resources, which was acquired by Conoco Phillips in 2006. They have a track record of steadily increased production. They care about efficiency, and they tend to keep their mouths shut.

The profits from all this activity are yet to come, so the present price remains speculative. But pipelines are coming to take out the gas, and there is a lot of rail capacity to take out the oil until oil pipelines reach the play.

Still, look at the financials before going into any oil exploration company. Oasis’ debt-to-assets ratio is about .5, which is acceptable, its operating margins are near 30%, and its operating cash flow is positive. The winning poker player is not the one who is making the most noise at the table.

What To Look For

When looking to buy an oil exploration company, there are never any certainties, but there are some things you need to look for. You want to see acreage in good locations, near existing production, you want to see a record of efficiency in drilling the acreage, and you want to see a strong enough balance sheet to show the acreage can be drilled out.

Don’t listen to what an oil guy says. Read their numbers. Check their claims against what other drillers are doing. America is in the midst of its first oil boom in many years, and you can make yourself some money in it.

The article The Right Driller To Own (And The Wrong One) originally appeared on and is written by Dana Blankenhorn.

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