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Chesapeake Energy Corporation Message Board

cadmium_telluride 5 posts  |  Last Activity: Jan 25, 2015 9:34 PM Member since: Dec 28, 2007
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  • cadmium_telluride cadmium_telluride Jan 25, 2015 9:34 PM Flag

    So at this point. I am not going to make a timing call. I am unable to predict when they will finally notice the coal price, and realize that they need to cut production to return the market supply demand to normal. Until they do so, coal investment is going to suffer. There is no light at the end of tunnel, UNTIL and UNLESS they start to do something to remove the excessive supply.

    I am not going to sell my shares at $1. I will hold on, whether these coal companies all go bankrupt or not. I still believe economy 101 will return to work, and coal price will return to normal. I just do not see what will finally get their butts moving in the right direction.

    Same is true, and even more so, in the shale oil and gas industry. They plunged more than three trillion dollars of investment money in the shale development, even since the start of the so called shale revolution. They have not yet seen a single penny of investment return for the three trillion dollars of wasted money. When do they run out of the foolish money?

    When do basic economy 101 rule return that smart money chases where profitability is? It is surely not In the shale sector. Is three trillion dollars wasted not enough?

    Sentiment: Strong Buy

  • cadmium_telluride by cadmium_telluride Jan 25, 2015 9:27 PM Flag

    I thought coal as a a commodity sector should always be cyclic. Basic economy 101 of supply demand should dominant. When supply is too high, price drops and producers cut production to return to balance. Vise versa, when supply is tight, price goes up and producer increase production to balance with demand. Of course the consuming sector also will do their part to respond to price signal.

    I was wrong. The economy 101 has broken down. For three freaking years, the entire world shut their eyes blind and gives no d--mned response to the price signal whatsoever. Not coal consumers, and not coal producers. Producers have barely cut production regardless of the un-profitable coal price. They continue to invest heavily on capital spending to maintain production level, despite of the fact that they need to preserve their cash and can not afford the capital spending to expand production.

    JRCC and PCX went bankrupt. In a normal world, when you go bankrupt you go out of business and shut the shop down. Some how they merely changed share holders and get another batch of bank loans and continue produce happily at a heavy loss. I see no production cut from these two bankrupt coal company.

    So I am at loss. If three years low coal price is not strong signal enough to tell the coal producers you've got to cut production. If even bankruptcy cannot force producer to cut production. Then what market force can eventually force they to cut back and return the market to normal? Some thing has got to give but I do not know what it is. The way it goes, if coal price drops to zero, they will still manage to produce the same amount of coal, and put free coal on the roadside to beg people to take them. But they will not cut production.

    The bottom line is had producers cut production aggressively three years ago, things have been taken care of and we would see a normal market today, with normal coal stock price. But as bad as it is now, going to below $1 stock price, they still do not cut!

    Sentiment: Strong Buy

  • cadmium_telluride cadmium_telluride Jan 12, 2015 10:14 AM Flag

    Yes from 2000 to 2008 natural gas price for FOUR TIMES shot above $10 or more. But from 2009 to today, six years, it never shot above $10 even once, despite of the nature that shale gas wells decline way much faster than conventional wells, and the supply is thus more unstable. It's just because there is an endless stream of foolish money supplied to the shale industry to keep them drilling like crazy. And producers would prefer to keep drilling and supply the market with free gas if delivering continued production growth makes investors happy and makes the investment money keep coming. Who cares shale gas profitability when the foolish money keeps coming?

    All counted, more than THREE TRILLION DOLLARS have been poured into the shale industry, and the industry has yet to show it can earn a penny of profit from has revenue. In a normal world, investment money chases where profitability is. Such an enormous amount of foolish money keep chasing an un-profitable sector, the shale gas sector, is unprecedented! But it can not last forever!

    Coal has no need to exist if they can keep producing natural gas and keep supplying the market at a heavy loss, and investors are happy to pour trillions of dollars into the shale gas sector and do not care a bit that they are not getting any revenue return. But this insanity can not last forever. The shale bubble will burst. It just will take longer than any one expected. I am hanging on to coal, however long it takes for things to turn around.

    Sentiment: Strong Buy

  • cadmium_telluride cadmium_telluride Jan 8, 2015 4:06 AM Flag

    Now the good news is the sudden and free fall oil price collapse, which no one expects, destroys about $200B of lost oil revenue of the big oil/gas industry. This is lost capital money which is no longer available to they to keep drilling wells. I hope this finally stops the insane growth of the un-profitable shale industry.

    And I hope this is a wake up call to oil/gas investors. The irrationality has reached an extreme. Out of the energy investment mix, 99% of money invested in energy is invested in oil and natural gas, and only 1% is invested in the coal sector. Now the foolish people suddenly discover that when 99% of people rush to one side, it's not profitable as the oil and gas price collapsed. When investment money exodus from the oil/gas sector and well drilling finally stops, production will collapse as well declines catch up, and energy prices, including coal price, will finally return to normal.

    From 2000 to 2008, natural gas has FOUR times shot up to over $10. From 2009 to today, 2015, gas price has not even once sot above $10, thanks to the insanity of so called shale gas revolution. Maybe, finally it is time to go back to show the nature of natural gas being extremely volatile. May we see $10 gas again this year.

    Sentiment: Strong Buy

  • Two and a half years ago I saw natural gas drop to $1.90 and coal price dropped in sync. I expected a quick turn around. I pin pointed the turning around of natural gas price on April 19, 2012. But I was wrong in predicting the subsequent collapse of the shale industry and skyrocketing natural gas price. But I was wrong.

    Folks still remember back in April 2012, practically every shale gas company vowed to cut production, as $2 gas was simply not profitable. It was far below profitability. But none of the gas producers took their production cut promise seriously. Those production cut promises were soon forgotten. Everyone continue to drill like crazy and produce like crazy, against rapid shale well declines. Shale wells decline faster. But producers burn money and keep drilling even faster, building up more debts. And gas price remained largely below $4, now below $3. And there is no sign producers will pause their well drilling.

    The reason is that the hugely un-profitable shale industry hinges on obtaining endless supply of fresh capital money to survive, in terms of new investment money and bank loans. The only way to continue to receive this money is deliver impressive production growth quarter after quarter, year after year, regardless of low price. Because investors and bankers love to see growth. How could total production nationwide be kept in check, if every producer claims to be growing exponentially?

    As long as they continue to have money to spend to grow relentlessly, they keep natural gas price low and keep their shale industry un-profitable. And that keeps foolish investors hooked up to the incredible growth story of the shale industry, not realizing that the entire industry is un-profitable under current gas prices. But that also keeps coal depressed. That's what happened.

    Now the good news is the sudden and free fall oil price collapse, which no one expects, destroys about $200B of lost oil revenue of the big oil/gas industry.

    Sentiment: Strong Buy

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