Gas Prices Leave Chesapeake Energy With a Catch 22

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Chesapeake Energy (NYSE:CHK) is burning cash, and the Oklahoma City-based company has been forced to cut deals to cover the approximately $25 billion gap between how much the oil and gas producer spent from 2010 to 2012 and how much cash flowed into its coffers. The problem, according to Wunderlich Securities energy analyst Jason Wangler is that management “expected the world to be different than it is today,” as he told the Wall Street Journal.

The vision Chesapeake Energy had for the future of natural gas is one shared by many of its peers. Natural gas was first a boon for domestic energy producers and then an albatross. Hydraulic fracking, a process that cracks rock deep underground to release oil and natural gas, made production possible in many previously untapped shale fields, sparking a land grab. However, during President Barack Obama’s tenure in the White House, soaring production of natural gas from horizontal drilling and hydraulic fracking has pushed supplies to record highs for many years. The boom in domestic production of both oil and natural gas provided the United States with 84 percent of its energy requirements last year, the highest annual level since 1991.

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