In February I wrote a Seeking Alpha essay, noting the circus surrounding the company.  Two weeks ago the alcohol arrived to the party.  I’ll paraphrase the key idea which appears lost in the noise:  At $5 ng and $100 oil CHK is cash flow neutral in 2014.  Asset sales easily get them there, so what’s the big deal?

The assumptions carry huge risk.  The $100 oil is possible, but at risk to booming horizontal oil production and recession.  And $5 natural gas is on a strip averaging under $4 for 2014 with risk to associated gas production and basis differentials.  What if booming wet gas NGL’s enter a paradigm of depressed prices?  Much could go wrong…

Meanwhile, Chesapeake must continue to drill their brains out to HBP their asset base.  There is good news:  Clearly CHK is a ridiculous asset play.  They could go bankrupt and still have common stock shareholders walk away with equity multiples of today’s stock price after bondholders are paid.  Pass a draft beer.