This quote accurately reflects Mr. Miller's analysis and opinion regarding the U.S. Natural Gas Industry: "We're drowning in gas," said a hedge fund manager who asked not to be identified because he has had dealings with the billionaire investors. "Wall Street has a very romantic notion about the natural gas business, but in reality it is a very tough business.
We are long term advocates of Natural Gas and we like Chesapeake, they are true riverboat gamblers who have broken some new ground.
However, we just can't ignore the long term negative fundamentals of the U.S. Natural Gas Industry. We also like Icahn for his activist push to clean up Companies but even he can't raise the Titanic.
Trying to turn the Titanic on a dime and pitch Shale Oil production sounds glamorous, but it will be a long haul with very uncertain results. Finally, Chesapeake remains predominantly a Natural Gas portfolio, highly levered, substantial off balance sheet debt and opaque cash flows.
Bottom Line: Chesapeake will correct down to the $22-25/share price range and more than likely stay there for some time given their balance sheet, predominant portfolio of natural gas, and "at risk cash flows".
"Analysis: Billionaires' bet on gas; brilliant or backfire? | Reuters