Chesapeake Energy: Hunting Value, Not Land
The recent surge in natural gas prices isn't benefiting investors in natural gas producer Chesapeake Energy (NYSE: CHK ). The stock actually declined during the polar-vortex winter. Even though natural gas inventory levels have fallen below the lows of the last five years, the futures price for the fuel source used to generate electricity hasn't moved much. In essence, the market still isn't convinced that a long-term structural change has occurred in the natural gas market.
Chesapeake Energy remains one of the largest natural gas producers despite a move to focus on greater oil production. The company projects approximately $5.4 billion in capital expenditures during 2014, which will be nearly completely funded via operating cash flow. Other energy producers including Halcon Resources (NYSE: HK ) and SandRidge Energy (NYSE: SD ) are encountering the same issues of capital efficiency not leading to stock gains.
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