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Martin Tillier

Martin Tillier

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This Natural Gas Giant Is Worth The Risk At These levels

Chesapeake Energy (CHK) is one of those companies that just don’t seem to be able to get out of their own way. They have been dogged by controversy over the last few years. Those that follow the energy sector will no doubt remember that founder and original CEO Doug McClendon retired in April of last year amid accusations of irregularities surrounding $1.1 Billion of loans that he had taken from the company. This week came the announcement that the Michigan Attorney General was bringing fraud and racketeering charges against CHK, stemming from their practices in acquiring land leases in the state. Add to that last month’s earnings that missed consensus estimates by nearly 20 percent and it seems that there is no good news around. That, though, is why the stock represents a good buy at current levels.

According to the Natural Gas Suppliers Association (NGSA)CHK is second only to Exxon Mobil (XOM) in terms of production of U.S. natural gas, so is well placed to benefit from the increasing demand and therefore price of the commodity that many analysts are predicting over the next couple of years. That has been the case for a while, though and yet Chesapeake has consistently underperformed both the broader market and the energy sector.

In the last year the stock has lost 6.47 percent compared to an 18.05 percent increase in the S&P 500 and a 12.38 percent gain in the energy sector ETF XLE. Obviously, then, there is risk in buying the stock, but…




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
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