Yesterday marked Aubrey McClendon’s first public appearance as the face of a company in some months. The Chesapeake Energy Corporation (NYSE:CHK) Chief Executive addressed the congregation at a Barclays plc conference on the future of energy yesterday, in New York.
The formerly outgoing executive has been out of the spotlight for months as investigations into his personal finances continue. McClendon is charged with taking personal loans from the same sources that were financing the company. It is also alleged that he put up company wells as collateral for personal loans.
Yesterday’s appearance, which was mainly about putting a healthier face on the company as it heads into Winter, a cyclically high gas price period, concentrated on the good that Chesapeake is doing, and the reasons to invest in the company.It was in essence a sales pitch, and it didn’t fall completely flat. Analysts may be more interested in what McClendon was doing personally, but they are still willing to address Chesapeake as a real company, despite evidence to the contrary.
In recent months Dan Loeb acquired a large chunk of Chesapeake Energy Corporation (NYSE:CHK)’s debt, and Carl Icahn bought a large amount of the company’s stock. The firm’s shares stand at just over $19.85, still far below it’s last peak of over $24 in April, before details of misdoings at the firm surfaced.
News stories concentrating on the firm’s financial malfeasance have damaged its reputation, sending shares to below $14 at one point this summer, but not beyond repair. Carl Icahn’s return to the company, a demonstration of confidence, shored up the confidence of many other investors, and buttressed the share’s price.
Investors are interested in the company’s business model. Part of the reason so many follow the company is because of its potential. Chesapeake Energy Corporation (NYSE:CHK) is the only large energy company in the United States that concentrates the majority of its efforts on Natural Gas. Fracking has unleashed a torrent of new sources of the product, and lower prices compared to gasoline, make it a difficult company to see a downside to.
The most promising of the company’s prospects, the exportation of liquified natural gas to Europe and Asia where prices are much higher, are further off technologically. The capacity to export the energy source simply does not exist yet. It will in a few years however, and somebody will take advantage of it, and investors are hoping Chesapeake will still be around to answer that call.
On the same day he appeared at a Barclays conference, Barclays equity research released a report on Chesapeake Energy Corporation, returning the stock to an equal weigh rating, with a price target of $20. The stock had formerly been overweight with a target of $20.
The report concentrates on the competent solving of the firm’s large shortfall by management through the sale of assets. This, according to the analysis’ thesis will allow the company’s most powerful executives to switch their attention to core business issues, rather than balance sheet shuffling.
The report also lauds the simplification that assets sales have wreaked on the firm’s strategy. Chesapeake has never actually met its goal of making real money from natural gas. Now that its peripheral, and sometimes downright crazy, investments are gone for the most part, the company can start making money from natural gas.
Despite the positive report from Barclays Plc (NYSE:BCS) (LON:BARC) and the first appearance of McClendon for some months Chesapeake Energy Corporation will not shake its black sheep status for some time to come. Investors are still angry with the financial dealings that landed the company in such trouble this Summer. Investigators are still trying to get to the bottom of them.
If the company, and more importantly McClendon stay out of the negative light for the next few months, the stigma that surrounds the firm may dissipate. Now, as the Barclay’s report suggests, is a time to stick to core business. If at all possible, it is a time to stay away from financial investigations, and keep from entering another company debt crisis.
If Chesapeake Energy Corporation (NYSE:CHK) keeps its head below the radar and demonstrates its value in the coming year, investors will forget about all of that other stuff. The prospects offered by the company are just that good.