Friday, July 13, 2012

Southeastern / Longleaf Letter Regarding Chesapeake ($CHK)

Southeastern is the largest holder of CHK. See their discussion of the investment on p2 of the longleaf partners letter [pdf] they just put out:

"Almost all of what was reported was previously known, but the rapid onslaught of stories blurred the lines between perception and reality.

Throughout the controversy, nobody has questioned the quality of the company’s assets. McClendon has done an excellent job building a portfolio of some of the best oil and gas acreage in the U.S. at attractive prices. [...] Also ignored in the criticism is that in 2011, McClendon was recognized as one of only eight public company CEOs who have been in place for over two decades and have earned a 20%+ yearly return for shareholders over that time."
I posted a few weeks ago the calculation showing that from 1993-2013, Chesapeake's cashflow from operations (CFO) will have grown at a compound rate of 43%, and CFO per share will have grown at a compound rate of 20%.


anony mouse said...

I always thought this was ridiculous - the WPP, while total bullshit, was well known by most people that knew the company. Good writeup by Longleaf.

Offtopic: Have you looked at PWE? What do you think about it?

CP said...

No, I have not. I think that everything oil and gas is pretty cheap though (except GMXR).

Why aren't the majors issuing 30 year debt at 4 percent and buying this stuff?

anony mouse said...

I agree, and I'm not sure. The only thing preventing me from buying more myself is that Oil and Gas is already seriously overweight in my portfolio

Allan Folz said...

From all that I've been able to tell management at the majors sucks. For 20-25 years anyone 1/2 on the ball went into something besides oil. It's not unlike the car companies, but at least making cars has some cachet of it's own to draw engineers. Drilling oil? One only does that for the money, and for a long, long time it wasn't where young people thought of as a place to go for the money.