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Zhong Lu

CHK Trading @ 90 Cents

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Yup.  Title says it all.  

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Yet Doug Lawler is still paid $22 million...

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(edited)

Actual bankruptcy risk or buying opportunity?

I see they don't look terribly strong, however what I see - if prices hold steady they're fine. They'll cut capital spending and maybe sell some acerage, but they'll make it through. Things get dicey if prices fall - though even if world prices fall, basin prices should hold constant as we get more pipeline capacity and prices between here and the gulf ballance (IMO). This means they're a high-risk play IMO, but a fair chance at doubling in the next year. Or am I overlooking something crucial?

(Take it easy on me - not a trader here, just dipping toes in the water)

Edited by Otis11
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(edited)

There's better things to buy.  

EDIT: If you want action try crystal meth (UGAZ, DGAZ).  

Edited by Zhong Lu
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Hell of a buy—if the short-selling bastards don’t take it down. 

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2 hours ago, Otis11 said:

This means they're a high-risk play IMO, but a fair chance at doubling in the next year. Or am I overlooking something crucial?

Nothing particularly high-risk about it.  The problem area is the big Note repayment schedule for 2025, and presumably the repayments needed before then.  My guess is that the Notes will be deferred, probably with some sweetener tossed in there to make it palatable to the lenders. Those could be some form of warrants, other equity dilution, or a surcharge in the interest rate.  

The problem that the Company faces is that the free cash flow will not be there, at current pricing, to discharge the debt on schedule.  So, the creditors will have to take it in stride and figure out a way to extend the debt - either by a Note swap, where the replacement Notes carry an interest surcharge or perhaps stock warrants, or some other program.  Right now it is unlikely that the Company could pay the Notes on the existing schedule.  That is what has caused the selling pressure on Wall Street.  But is it a realistic pressure?  Not really. With some restructuring of the debt, the Company will do OK.  And, if it pulls it off, then you can expect stock appreciation, as long as the stock is not diluted. 

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(edited)

8 hours ago, Jan van Eck said:

Not really. With some restructuring of the debt, the Company will do OK.  And, if it pulls it off, then you can expect stock appreciation, as long as the stock is not diluted. 

A friend once told me that the only winners in a restructuring is major shareholders and financiers. 

wait to invest to after chap 11 in my view. 

Edited by Rasmus Jorgensen

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(edited)

Well, if you bought CHK on Monday you'd be down 15-20% already.  

If you want to invest in natural gas long term, choose something else like CRK.  As I said: there's better options.  ALL of the natural gas producers are down in the dumps, so if you're looking for big returns in the long run, any of them is good.  Just avoid the ones that have bankruptcy risk.  I mean, would you rather trust your money with Jerry Jones or with whoever is running CHK right now? 

EDIT: Hmmmm.  Reconsidering.  If you've got a thousand dollars to waste, it's price now is probably worth it.  67 cents is fair value for the company's prospects.  

Edited by Zhong Lu

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