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A Gusher For Chesapeake?

As natural gas prices skyrocketed, so did shares of Chesapeake Energy () (CHK), the third-largest independent gas producer. They jumped from 18 in mid-May to 33.09 on Sept. 7. Does the stock still have pep? Absolutely, says Richard Wolfe of Zacks Investment Research. Chesapeake's vast acreage, growing fleet of drilling rigs, dominant position in the U.S. mid-Continent, and lack of Gulf operations underpin the positives, says Wolfe. John Maloney of M&R Capital Management, which owns shares, says Chesapeake has leveraged itself to gain from rising prices by aggressively buying proved reserves. His 12-month target for the stock is 40. Wolfe of Zacks expects 2005 profits of at least $2.14 a share based on gas prices of $7 per thousand cubic feet this year. In Katrina's aftermath, gas prices hit $11, so he has yet to firm up his 2006 forecast.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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