Chesapeake Energy

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#11
Hi,

The impairment is massive and has wiped off much of the book equity. Impairment is only "real" and helps fairly reflect the recoverable value of the oil reserves. However, thats if the company wishes to dispose of the oil reserves wholesale. Since chk has improved their liquidity position and not likely to face the likelihood of default in near term, its not so relevant to review the results with this impairment in mind. Point is that the company (with improved solvency) has more likelihood of waiting out this period of low crude prices and be able to capitalise and realise the oil reserves at higher market prices.

Taking mere debt to (book) equity is quite misleading, because one will end up having a worrying figure that has accounted for impairment. Just another view on this.

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