"The lower gas prices go today, the better it is for Chesapeake."
Sounds crazy at first, sure, but the country's leading natural gas producer does have a lot of factors working in its favor.
Chesapeake's got a dominant position in each of the top shale plays -- what it now refers to as the Big Four. From the Haynesville to the Marcellus, these are low-cost leaders that ought to generate strong rates of return in today's environment. That's a strong part of the equation, and a reason look to favorably on neighboring players like Encore Acquisition and Range Resources
By hedging its production to the tune of 80% in 2009, Chesapeake gets the best of both worlds: gas price realizations that don't fall, and service costs that do. On the call, the company said it is "renegotiating rates downward with every vendor, large and small on every new well." That's bad news for folks like Halliburton
Speaking of which, Chesapeake has partners doing a lot of the heavy lifting on that front. The company structured its joint ventures with Plains Exploration & Production
All told, that's $4 billion being spent on Chesapeake's behalf -- and the further service costs drop, the further those drilling dollars go. Service costs dropping are a direct response to lower gas prices and field activity, so it's no wonder Chesapeake's gotten to love low gas prices.