A.D. The “excavation, baby, drill” mantra in the early 2000s was successful in some respects — it flooded the market with energy supplies, greatly reducing prices. For investors, though, it was a very scary deal. As US oil and gas producers struggled to increase production, their shares fell behind. The energy sector has put the bull market on hold for ten years following the financial crisis.
Right now, US energy executives, investors and analysts are developing poetry about Shale 3.0. The new era of the industry is less debt, production is slower and more attention is paid to shareholders’ cash.
Chesapeake Energy (CHICKED CHK), son of the US Shell Revolution Poster, is now more likely to carry the Shale 3.0 movement. And the stock seems cheap.
The Oklahoma-based natural gas producer, led by the co-founder and CEO of the attacker, Aubrey McKlinden, has stepped up its efforts to acquire new acres of land and more and more gas. McKlinden He was killed in a car accident in 2016, and his business venture soon disappeared. Chesapeake filed for bankruptcy in June 2020.
Now that capital has been redefined, Chesapeake has a new lease on life. Net debt has dropped from $ 9 billion to $ 600 million, annual interest and dividends have been cut to $ 700 million, and administrative, board, and portfolio changes have been adjusted.
|Headquarters||Oklahoma City, OK|
|Latest price||$ 61.85|
|Change from February 9th||37.50%|
|2022E Sale (Bill)||$ 4.20|
|2022E Net Inc. (Bill)||$ 1.00|
|2022 EPS||$ 8.92|
|Future 12-mo. P / E||7|
|Market Price (Bill)||$ 6.10|
|Annual division||$ 1.75 per thousand + 50% FCF|
E = estimate. FCF = free cash flow
The new Chesapeake is a thinner machine, expanding its cash flow as more natural gas prices rise. The company plans to keep the debt small. Above all, it has a formal return policy for shareholders, with an annual base profit of $ 1.75 per share, paid quarterly and 50% of the previous quarter’s cash flow. That brings the current dividend to at least 2.8%, which offers a lot more promise.
Chesapeake’s approach is ideal for energy investors who are quick to pocket money. The devil is on the list, but the 2020s could easily be the last decade of globally significant fossil fuels. This is not the same as the high cost of finding and developing assets that have not been valued for years.
The Chesapeake administration still knows that investors need to return. We’ve got that, ”said Michael Wichterich, chairman of Chesapeck’s board, in his first post-banking call in May. We must produce good results.
The stock is cheaper than other natural gas producers, which provides a mandatory entry point for investors. Chesapeake 2.4 times the value of the enterprise to reach the 2022 Ebitda Agreement or 2.4 times the income before interest, tax, depreciation and payment. This is compared to 5.8 times
Regional resources (RRC); 4.2 times b
Kotera Energy (CTRA), newly integrated
Cimarex Energy And carbon dioxide and gas; 3.7 times b
Oventiv (OVV); And 3.3 times b
Southwest Energy (SWN)
If Chesapeake maintains its current level of production, it expects the company to generate a total of $ 6 billion in cash by 2025 — equivalent to the company’s market value today. That should be the main point for investors. Any success after 2025 will be at odds with current values.
Meanwhile, investors are starting to respond immediately and immediately. Chesapeck’s new dividend system will be launched early next year, with the company’s first variable dividend to be paid in the first quarter of 2022 based on the fourth quarter of free cash flow. Using that formula and current natural gas futures prices, according to UBS Lloyd Bayr, the stock will generate a 12 percent profit margin next year. Earlier this month, Chesapeake’s stock started at $ 88, with a 45% premium for near-term pricing at around $ 61.
The rest of Chesapeake’s free cash flow can go to stock purchases, dividends or purchases. The company is closing the Zero-Premium deal.
Wine power (VEI) next month, which will include Chesapeake in the Hainvilleville Shell on the Louisiana-Texas border and add to Apalchia Marcellus and Texas Eagle Ford formats.
The focus on natural gas will make Chesapeake a somewhat antithetical leader in the industry in the long run.
“From a basic point of view, we are fraudulent in the commodity cycle and realize that we do not have the renewable goods we need in a short period of time.”
Changebridge Capital Sustainable Equity
Exchange Trading Fund (CBSE).
Chesapeck’s third-quarter results on November 3 could be encouraging for more investors. Due to the late arrival of high natural gas prices, the cash flow must be more than adequate. The company may present a 2022 guideline and introduce a new senior executive, Nick del Oson.
Chesapeake is a story that has burned down investors in the past. Attractive speculation, deliberate planning, and a changed philosophy make it a second chance.
Write Nicolas Jasinski at firstname.lastname@example.org