Sathya Ganesan on Chesapeake Energy Corporation (CHK) until May 29, 2013
$407.38 of gains, or a return of 40.74% over the 12 months this idea was active.
|Chesapeake Energy (NYSE)|
|Range||26.35 - 26.85||Previous||26.81|
|52 week||16.23 - 29.06||Open||26.81|
The average forward price ratio of oil to natural gas for equivalent btu energy
is 7:1. Historically this number has been < 1.5:1
Natural gas prices at historic lows, any rebound of natural gas prices will
provide significant upside to CHK ( currently unhedged for 2012 & 2013)
Supply and Demand
- Increased natural gas demand going forward
- Industrials, Electric Power, Transportation (CNG & LNG vehicles)
- Natural gas supply glut expected to taper off
Negative investor sentiment
- Several downgrades of CHK by sell side analysts in April.
- Credit rating was also downgraded by S&P to BB in April.
- These downgrades have resulted in CHK being oversold to extreme levels. From a contrarian view, this is a great opportunity to build long positions in
- Company insiders have been steady buyers from March 2011 – March 2012