Guest Post: Corporate Hubris Humbles Chesapeake – Cabot Soars Sure & Steady

The following guest post is from MDN subscriber and friend, Chris Acker. Every day Chris sends MDN editor Jim Willis a list of items he notices in the news that may be of interest to MDN readers, and Jim includes many of them. The MDN service is made better because of readers like Chris—and we publicly thank him.

Chris owns property in Susquehanna County, PA, which is leased with Cabot Oil & Gas. He looks forward to the day when his property is drilled by Cabot. In the meantime, Chris watches Cabot (and other drillers) and keeps tabs on their operational and financial health. Chris points out in his post below that for the first time in many years, Cabot Oil & Gas’ market capitalization has exceeded that of Chesapeake Energy. Chesapeake is the country’s second largest natural gas driller with revenues many times that of Cabot—so this is a true milestone.

Forthwith, Chris’ excellent observation:

Dear Friends:

For the first time, as far as I can tell, Cabot Oil & Gas’ market capitalization exceeded that of Chesapeake (CHK)!

What an extraordinary achievement on Wednesday, February 27, 2013!

With yet another record closing and the stock up all day, Cabot’s $62.57 translates to a market cap of $13.13 billion.

CHK, up as well but not enough, closes $20.14 for a market cap of $12.97 billion.

Cabot’s achievement is all the more astonishing given that CHK’s revenues are about ten times larger. In 2012 they booked $1.57 billion in net income, or $2.32 per share. Contrast this to 2012’s loss of $940 million, or minus $1.46 per share.

I will not dwell on the many ills of this competitor. In contrast, Cabot shows how steady, competent management, clear strategies and objectives, transparent financials, and a motivated workforce lead to success. A little luck leasing the sweetest of the Marcellus sweet spots doesn’t hurt either.

Here’s some history:

CHK first crash – Feb 1999 Adjusted price $0.75 Cap $0.5 billion, Cabot 2/99 $1.80 Cap $0.4 billion

CHK all time high – 6/30/08 $66.78 $40.3 billion, at that time, Cabot $34 $7.1 billion

CHK recent high – 7/22/11 $34.39 $22.1 billion, at that time, Cabot $40 $8.4 billion

CHK latest crash – 5/17/12 $13.55 $8.7 billion, at that time, Cabot $36 $7.4 billion

So again, Anne and I thank the heavens, our lucky stars and other assorted good luck charms both terrestrial and celestial, that we are leased with Cabot Oil & Gas.

Very truly yours,
Chris and Anne Acker
Montrose, PA

We raise a toast to Chris and Anne, and to Cabot. Cheers!