Exclusive: Q&A With Chesapeake Energy CEO
According to Thompson, in the last year Chesapeake Energy's CEO Aubrey McClendon purchased 2.6 million shares of CHK, at a cost of $111 million. What does he know that you don't?
Following is a summary of the main points made by McClendon on "Fast Money".
Why have you purchased so many shares of your company?
“I like Chesapeake and its prospects,” replies McClendon. “I think we trade at a significant discount to our value today. So anytime I can scrape some money together I go out and I buy the stock.”
What supports your optimism?
"Look at the company’s growth rate, replies McClendon. “Our production was up 31% year over year and our adjusted net income was up 32% and yet the company is trading at about 12 times annualized earnings off this quarter. I think it’s a great growth company with very powerful fundamentals that trades at a substantial discount to where many of its peers trade.”
Where should it trade?
“It’s not my business to say, but I think it’s got a double in it and that’s why I bought so much,” replies McClendon.
How much of your performance is tied to the price of the commodity itself?
“Not very much,” says McClendon. “It’s a bonus when the commodity cooperates and we’re really the most active hedger in the business so we take a lot of the commodity price risk out. Right now we think that nat gas prices will stay in the $8-$10 range.. and we’ll do quite well in that kind of flat price environment.”
And in earnings news Chesapeake reported a first-quarter net loss related to hedges on Thursday, compared with a year-ago profit, but its adjusted profit topped analysts' forecasts.
Chesapeake, based in Oklahoma City, Oklahoma, had a net loss available to shareholders of $143 million, or 29 cents per diluted share, compared with a profit of $232 million, or 50 cents per diluted share in the same period a year earlier.
You can see the interview in its entirety at the end of the Word on the Street video.
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Trader disclosure: On May 1, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (MSFT), (DIS), (INTC); Adami Owns (AGU), (NUE), (BTU), (C), (GS), (INTC), (MSFT); Najarian Owns (AAPL), (TSO), (XLF), (YHOO); Najarian Owns (C) Calls, (CHK) Calls, (MSFT) Calls, (WLT) Calls, (POT) Calls; Finerman Owns (CHK), (GS), (HD); Finerman's Firm Owns (MSFT), (NYX), (SUN), (TSO), (TYC), (TEL), (VLO), (CMVT); Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY); Finerman's Firm Owns S&P 500 Puts; Finerman's Firm Owns (C) And (C) Leaps, Finerman Owns (C); Finerman's Firm Is Short Pounds