Thursday, April 08, 2010

Chesapeake Energy Looks Toward 'Oily' Future


“The economics just compel you to look for oil rather than natural gas right now,” Chesapeake Energy’s (CHK-$24.09) chairman and chief executive officer Aubrey McClendon told attendees at Hart Energy’s annual Developing Unconventional Gas conference in Fort Worth last week.

McClendon admitted on the company’s February earnings call that $5.00 per million BTU pricing on the New York Mercantile Exchange (NYMEX) equates to $3.50 gas at the wellhead, once differentials like gathering and compression costs are included in the cost calculus. “Even $3.50 gas at the wellhead does not create enough cash flow in the industry to maintain today’s drilling price — even for the best-managed shale plays,” he said.

Why is the nation’s second largest natural gas producer suddenly priming the drill-bit for oil?
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Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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