In the recent second-quarter earnings release Chesapeake Energy unveiled that it had found an enormous new resource play in the Utica Shale that it believes today in an undeveloped state is worth $15 to $20 billion. That is almost $25 per Chesapeake share, each of which currently trades for under $35. I’ll let you in on a little secret, I think $35 was likely a pretty good price for Chesapeake (likely a very good price) before learning of this $25 per share increase in value. I think we are likely looking at a company selling for well less than 50% of the value of its net assets.
I’m eager to learn as much as I can about this Utica Shale play, and Chesapeake CEO Aubrey McClendon spoke on Mad Money of all places last night about it. Here are some details:
- In his intro Cramer points out exactly what I’ve been saying, which is that the value of this new discovery is almost equal to the entire market capitalization of Chesapeake today.
- The Utica shale is located in Ohio, which sounds strange today as a place for an oil discovery, but Ohio and Western Pennsylvania were the birthplace of the oil industry in the 1850s.
- McClendon thinks this new Utica shale discovery along with the Marcellus shale discovery in Pennsylvania could be transformative events for the economies of the “rust belt.”
- Could also be transformative for the entire country as they are talking about really big numbers. In the Utica there could be 25,000 wells drilled over several decades which would be over a $200 billion investment,
- In terms of oil and natural gas liquids, there could be 25 billion barrels of oil equivalent and could be one of the biggest discoveries in United States history.
- Cramer asks how McClendon could suggest that the Utica shale is economically superior to the Eagle Ford (the Eagle Ford is wildly economic). McClendon’s response was that CHK is in every major shale play in the States and a top one or two position in the Eagle Ford, so they know what all of these plays are capable of. And with the wells they have drilled so far in the Utica they can see what it is capable of. The price for the natural gas produced will be better than the price of natural gas produced from the Eagle Ford (which is in Texas).
- There are three phases to the Utica reservoir, oil, natural gas liquids and natural gas.
- Cramer asked why this announcement last week didn’t attract more attention given how huge the resource play is. Both agreed the debt news overshadowed it and McClendon noted that these plays take some time to develop. But if you are looking for credibility look back to 2007 when McClendon announced their Haynesville discovery and said that it would be the largest gas field in the States. Well, today it is the largest producing gas field in the States.
- The last 40 years OPEC has had a stranglehold on the economy of the U.S. and even the foreign policy of the U.S. There is now with unconventional resources and hydraulic fracturing a chance to almost eliminate the reliance on OPEC oil within 10 years.
- McClendon thinks best use of natural gas is in vehicles in the United States. Chesapeake is trying to drive this transformation and thinks the government should get behind this as well. Rather than sending all the money on oil to OPEC countries the States could create jobs here and provide a cheaper fuel for Americans.
- Cramer referred at the end to the $91 net asset value figure that Chesapeake has provided for the company and compared it to the current $34 stock price.
Here is the link to the video: http://www.cnbc.com/id/43973333
I’m eager to learn as much as I can about this Utica Shale play, and Chesapeake CEO Aubrey McClendon spoke on Mad Money of all places last night about it. Here are some details:
- In his intro Cramer points out exactly what I’ve been saying, which is that the value of this new discovery is almost equal to the entire market capitalization of Chesapeake today.
- The Utica shale is located in Ohio, which sounds strange today as a place for an oil discovery, but Ohio and Western Pennsylvania were the birthplace of the oil industry in the 1850s.
- McClendon thinks this new Utica shale discovery along with the Marcellus shale discovery in Pennsylvania could be transformative events for the economies of the “rust belt.”
- Could also be transformative for the entire country as they are talking about really big numbers. In the Utica there could be 25,000 wells drilled over several decades which would be over a $200 billion investment,
- In terms of oil and natural gas liquids, there could be 25 billion barrels of oil equivalent and could be one of the biggest discoveries in United States history.
- Cramer asks how McClendon could suggest that the Utica shale is economically superior to the Eagle Ford (the Eagle Ford is wildly economic). McClendon’s response was that CHK is in every major shale play in the States and a top one or two position in the Eagle Ford, so they know what all of these plays are capable of. And with the wells they have drilled so far in the Utica they can see what it is capable of. The price for the natural gas produced will be better than the price of natural gas produced from the Eagle Ford (which is in Texas).
- There are three phases to the Utica reservoir, oil, natural gas liquids and natural gas.
- Cramer asked why this announcement last week didn’t attract more attention given how huge the resource play is. Both agreed the debt news overshadowed it and McClendon noted that these plays take some time to develop. But if you are looking for credibility look back to 2007 when McClendon announced their Haynesville discovery and said that it would be the largest gas field in the States. Well, today it is the largest producing gas field in the States.
- The last 40 years OPEC has had a stranglehold on the economy of the U.S. and even the foreign policy of the U.S. There is now with unconventional resources and hydraulic fracturing a chance to almost eliminate the reliance on OPEC oil within 10 years.
- McClendon thinks best use of natural gas is in vehicles in the United States. Chesapeake is trying to drive this transformation and thinks the government should get behind this as well. Rather than sending all the money on oil to OPEC countries the States could create jobs here and provide a cheaper fuel for Americans.
- Cramer referred at the end to the $91 net asset value figure that Chesapeake has provided for the company and compared it to the current $34 stock price.
Here is the link to the video: http://www.cnbc.com/id/43973333
- CEO Buys, CFO Buys: Stocks that are bought by their CEO/CFOs.
- Insider Cluster Buys: Stocks that multiple company officers and directors have bought.
- Double Buys: Companies that both Gurus and Insiders are buying
- Triple Buys: Companies that both Gurus and Insiders are buying, and Company is buying back.
