Chesapeake Energy

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It hasn’t been a great year for Chesapeake Energy, just coming down from a management meltdown and now giving up on its leases in New York over the state’s ban on high-volume fracking. It’s a battle that’s been on for two years over thousands of acres of natural gas leases in New York, where fracking has been banned for five years. The problem was that the landowners leased the acreage to Chesapeake before the advent of hydraulic fracturing, and now they don’t want these leases extended under the original terms, according to a report by Reuters. The report says that Chesapeake has now notified the landowners that it is giving up the fight, and that the decision should be finalized next week. But there’s more to this than a simple court case...

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The Obama administration has come out in support of the idea of exporting U.S. natural gas. This stance is counterproductive and shortsighted, and if followed, it will prove harmful to domestic manufacturing (i.e., value generation) and to future generations of Americans. While exporting natural gas would certainly prove to be an economic boon for a very select minority of companies and individuals, it makes no sense from an energy standpoint and undermines our national interests. All it will do is enrich a few while boosting prices for all domestic consumers and shortchanging the energy and environmental inheritance we pass along to our children. The time has come to give greater weighting to energy matters than to economic and political desires. To continue to be energetically wasteful at this time in history, when so much data is telling us that the effluent of our activities is measurably altering our support systems, is beyond embarrassing.  It's tragic.

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Less than a month after being ejected from Chesapeake Energy, the charismatic, yet controversial, Aubrey McClendon, has launched his next venture in the form of the American Energy Partners. Forbes were sent a copy of the email that Aubrey sent to his many contacts in the oil and gas industry in his search for potential acquisitions, or assets that his new company could get involved with...

Participants don’t see them. Outsiders shake their heads, until they get sucked in. Central banks create them, but deny their existence. Risks no longer exist. Take natural gas.

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Update: it appears Carl Icahn agrees with our assessment: CARL ICAHN SAYS CHESAPEAKE'S COLLECTION OF ASSETS "ARE THE BEST PORTFOLIO OF ENERGY ASSETS IN THE COUNTRY"

Back in May 2012, when Reuters' all out aggressive campaign against Chesapeake Energy was in full swing and the stock was trading around $14 per share but before Icahn and Loeb were publicly involved, we predicted that contrary to the endless balance sheet bashing there was, in fact, much upside to CHK. We said that the argument rests on one simple fact: its asset base, which ignoring the firm's liabilities - as in a ZIRP environment, even CHK could easily refi its debt at very agreeable terms - and the CEO's lousy industry reputation implied a far higher stock price for the company. To wit: "the company has lots of good assets, as well as quite a few legacy liabilities, combined with an industry environment that is as bad as it has ever been. And sure enough, in betting that the environment might actually improve for a change, there are quite a few big firms which may be happy to onboard the assets and the liabilities, knowing they wouldn't impair the right side of their balance sheet, while acquiring some good real estate and substantial reserves on the left, at a valuation that is the cheapest in the industry. Because in finance, once central planning is (finally) stripped away, valuation is all that matters." And even before that, a far more immediate catalyst we predicted would be a simple succession event "which eventually will culminate with the long overdue termination of the company's head." Or, said simply, the sacking or resignation of the disgraced CEO would unlock material upside value. Moments ago just this happened, as the company just announced a "succession plan" the direct result of which is that the CEO is out as of April 1. The upside value in question: just about 10% as the stock is currently soaring in the after hours session.

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• Boeing 787 Dreamliner Fire Probed, Blaze Adds to Setbacks (BBG)
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• HSBC N.J. Client Admits Conspiracy in Offshore Tax Case (BBG)
• Lampert to Assume CEO Role at Sears (WSJ)
• Abe prepares fresh stimulus measures (FT)
• U.S. Set for Biggest State-Local Jobs Boost Since 2007 (BBG)
• Pakistan Seen Needing IMF Bailout as Rupee Drops Before Vote (BBG)

The “shale revolution” has been grabbing a great deal of headlines for some time now. A favourite topic of investors, sector commentators and analysts – many of whom claim we are about to enter a new energy era with cheap and abundant shale gas leading the charge. But on closer examination the incredible claims and figures behind many of the plays just don’t add up. To help us to look past the hype and take a critical look at whether shale really is the golden goose many believe it to be or just another over-hyped bubble that is about to pop, we were fortunate to speak with energy expert Arthur Berman.

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• Amazon faces new obstacles in fight for holiday dollars (Reuters)
• SEC Expands Knight Probe (WSJ)
• Singapore’s Casinos Lose Luster as Gaming Revenue Decline (Bloomberg)
• Amid Petraeus sex scandal, Air Force to release abuse report (Reuters)
• Geithner’s Money Fund Overhaul Push Sparks New Opposition (Bloomberg)