Wednesday, July 9, 2008

Is a Cubic/Chesapeake Deal Coming?

I saw this drawing in a recent Cubic Energy (QBIK.OB) presentation. The orange on the map is Chesapeake Energy, the blue is Goodrich Petroleum and the yellow is Cubic. Chesapeake and Goodrich recently struck a joint venture deal whereby Chesapeake will operate Goodrich's leases in this area. Assuming the blue area now goes orange, it appears as though Chesapeake has Cubic completely surrounded.

Is a deal between Chesapeake and Cubic upcoming? I'm just speculating, but a few things give me the idea: 1) Chesapeake is flush with spending money from its recently signed joint venture deal with Plains Exploration, the recent issuance of new debt and an upcoming issuance of new equity. 2) Chesapeake is deal happy. They are cowboys with big egos. They like to win. 3) A Cubic deal would probably be relatively small to Chesapeake. 4) I bet they want to fill in the holes in their leasing map. Controlling Cubic's leases would give them a lock on their core area.

What does a deal look like? I don't know, but I imagine Chesapeake will be putting up the cash and the expertise to drill the wells.

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