Chesapeake Energy Corporation (CHK)’s Future Is Brighter Than You Might Think

The “corporate contingent” element is worth a passing glance. With gas prices at about a third of their levels five years ago, new plants are actively being built in a variety of locations by companies that use gas as a feedstock and are euphoric about its price slide. For instance, Andrew Liveris, CEO of giant The Dow Chemical Company (NYSE:DOW), called in a Monday Wall Street Journal op-ed piece for an approach that would “maximize America’s new competitive advantage by adopting a measured approach to natural-gas policy.” By that he means “Let’s think twice about active LNG production.”

The Foolish bottom line
But here’s my response to the question about the wisdom of dropping a few shares of Chesapeake into your portfolio pouch: I’ve been traipsing around the broadly defined oil patch for longer than I care to admit. As such, I know that there’s one truism about the conventional energy industry: As in physics, what goes up will later come down and vice versa. Warren Buffett faced that reality in 2008, when, with crude prices headed for $147 a barrel, his Berkshire Hathaway Inc. (NYSE:BRK.A) became ConocoPhillips (NYSE:COP)‘ largest shareholder — just in time for black gold levies to plummet.

On that basis, and given Chesapeake’s asset base and the degree to which its shares have plunged from their highs, it appears that the likelihood that the stock will head appreciably south from here is about as great as the prospects for marauding Civil War Gen. William Tecumseh Sherman to make another pass through Georgia. So the downside is likely to be minimal, and I’m inclined to recommend slowly acquiring shares in this asset-rich and rapidly changing company. Then sit back and exercise patience.

The article Chespeake’s Future Is Brighter Than You Might Think originally appeared on Fool.com and is written by David Lee Smith.

Fool contributor David Lee Smith has no position in any stocks mentioned. The Motley Fool recommends Halliburton (NYSE:HAL) and Total and has options on Chesapeake Energy.

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