A lot of recent news has been focusing on Chesapeake Energy (CHK), and most of it is not exactly what I would consider “good news.” Chesapeake currently looks like a good target for investors who hope that gas prices will soon rebound. As a result, Chesapeake may soon be acquired by another company. Its net debt and equity is currently valued much lower than similar companies, making the oil-and-gas provider a prime target for acquisition. The industry is experiencing a ten-year low in the price of natural gas, and this has hit Chesapeake hard, as natural gas accounts for 83% of its reserves.
There are also current investigations into the way Chief Executive Officer Aubrey McClendon’s personal loans were backed by stakes in company-operated wells. This situation has damaged the credibility of the company, and McClendon’s chairmanship position has been stripped until the investigation can be completed.
Exxon Mobil (XOM), Chevron (CVX) and Royal Dutch Shell (RDS.A) are the major companies that may be interested in acquiring Chesapeake. In my opinion, it would be a great idea for a company to take a chance with the second largest producer of natural gas in the world. A rise in prices could happen at any time, and when it does, the company that has access to Chesapeake’s reserves will certainly be in a strong position. As Peter Sorrentino puts it, this would be a great way for the oil companies to “pick up reserves on the cheap.” To continue reading, click here.