A Credit Bubble Stocks correspondent writes in about Exxon Mobil's acquisition of Canadian E&P Celtic Exploration, and what it means for Chesapeake,
"Exxon is paying prices that would value CHK’s Marcellus at $7.8-9 billion if it was in Western Canada! This is double where the market is valuing these assets, and within ~25% of my values. This is very bullish for CHK’s value and shows that the market is still in line with my valuation. In addition, the smartest guys in the room are still buying large assets. While Western Canada is attractive for the potential to export LNG – no one has started construction of a plant, much less the long pipeline through “first nations” territory to feed the LNG train. It will take tens of billions in infrastructure and years before realizations and costs in Western Canada even get to the (better on both counts) levels in the Marcellus.I still like the Chesapeake Energy preferred, yielding 6% with a conversion option.
CHK is paying down a lot of their debt this month (they are receiving proceeds of their $6.9 billion of sales this month) [and is] also going to be in much better financial shape when they report earnings November 2nd, and I expect they will lower future capex. They are also shopping more tier-2 assets than anyone realizes, and could be debt free if they wanted by the end of 2013 if they wanted to. The market doesn’t know how to model CHK right now, even though things are clearly a lot better. When the company provides hard numbers, I expect the market (and the shorts) will take notice."