Interesting article from the Financial Times about a subject I've wondered about as well. Will the surge in land prices for US shale oilfields last?
Every time you read an article, one wonders why Chesapeake Energy (CHK) can't translate purchases of acres at $1,400 that is sold for $15,000 into huge stock price gains. Also, it amazes me that none of the major energy companies with vast cash hoards aren't able to beat CHK to the punch for cheap acres.
Ultimately the issue with Chesapeake is that it requires a ton of debt to grab all this land and hold onto it until it is able to drill and recover oil or nat gas.
The big surge in nat gas production from these shale plays have already led to a price collapse in the domestic market. The recent expansion into oil plays isn't likely to cause the same collapse in price as oil is an international market. If nat gas was an international market as well, prices wouldn't have collapsed. Asian and European users pay double, triple, and quadruple the price currently.
Still Chesapeake's success level might be it's own undoing. The assets are only valuable if they remain scarce. If these foreign oil companies that are buying up assets from CHK and CRZO are able to learn the process and duplicate in other countries, than CHK might regret these deals.
If oil prices remain high and Iran causes supply interruptions or Iraq never gets back online, CHK will look like a genius. Most investors though would prefer that it sign a few more deals to reduce debt. Also, quit signing up millions of acres in the next great shale play as it only adds supply and highlights a region that the industry might overlook if CHK isn't involved.