Will Investors Regret Hating This Natural Gas Stock? – Chesapeake Energy Corporation (CHK): Access Midstream Partners LP (ACMP), Clean Energy Fuels Corp (CLNE)

Why it should be loved
Now, with that out of the way, let’s get to why you’d want to buy this company. Chesapeake Energy Corporation (NYSE:CHK) is an emerging liquids story and is now the 11th largest liquids producer in the country, and is aiming to grow that production by 27% this year to a total of 26% of its production. As you can see in the map below, Chesapeake has acreage positions in most of the top onshore plays, positioning it to continue to grow its liquids production:

Source: Chesapeake Investor Presentation

There are two other key points to Chesapeake Energy Corporation (NYSE:CHK)’s future that I think investors shorting the stock are missing. First, McClendon, the man responsible for a lot of the company’s bad publicity and debt-fueled growth is retiring. While the new CEO has a big task in turning around the company, the assets are all in place, so the focus will be on execution.

Finally, there is massive upside if the price of natural gas begins to rise. While natural gas is 77% of its current production, it only makes up 23% of the company’s revenue. For example, a rise in the price of natural gas from $4-$5 this year would increase earnings by more than 30%. Given that most drillers are holding back on dry gas drilling, at some point the price of gas will start to creep higher; when it does, it’ll provide a big boost to Chesapeake’s shares.

My Foolish Take
Personally, I don’t think shorting Chesapeake Energy Corporation (NYSE:CHK)’s shares is a good idea. If the new CEO can provide stability and lead the company to execute on its liquids growth plan then the company should be in pretty good shape. Further upside is possible if natural gas prices begin to head higher. Once that happens, investors shorting this company will regret that decision.

The article Will Investors Regret Hating This Natural Gas Stock? originally appeared on Fool.com.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Clean Energy Fuels. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.