Founded in 1989, Chesapeake Energy (CHK) has grown to become the second largest producer of natural gas and one of the most active drillers of new wells in the U.S. Chesapeake competes with other oil and gas producers like Exxon Mobil (XOM), ConocoPhillips (COP), Anadarko (APC), BP (BP) and Chevron (CVX). Chesapeake owns interests in around 44,100 producing natural gas and oil wells that are currently producing around 2.4 billion cubic feet equivalent (bcfe), 93% of which is natural gas.

Chesapeake's (CHK) natural gas price per million cubic feet is slowly rising again after witnessing a steep decline, from $7.74 in 2008 to $3.16 in 2009, as a result of weak consumer demand during the economic downturn. As crude oil prices continue to rise and the oversupply of gas declines, we expect Chesapeake's natural gas price to increase to around $6.2 per million cubic feet by the end of our forecast period. Chesapeake competes with other oil and gas producers like Exxon (XOM), ConocoPhillips (COP), Anadarko, (APC) BP (BP) and Chevron (CVX).

Chesapeake's (CHK) natural gas price per million cubic feet is slowly rising again after witnessing a steep decline, from $7.74 in 2008 to $3.16 in 2009, as a result of weak consumer demand during the economic downturn. As crude oil prices continue to rise and the oversupply of gas declines, we expect Chesapeake's natural gas price to increase to around $6.2 per million cubic feet by the end of our forecast period. Chesapeake competes with other oil and gas producers like Exxon (XOM), ConocoPhillips (COP), Anadarko (APC), BP (BP) and Chevron (CVX).

Analyst Upgrades

• Chesapeake (CHK) to buy from hold at Canaccord.
• Biogen (BIIB) and Regeneron (REGN) to outperform from sector perform at RBC Capital.
• Caribou Coffee (CBOU) to outperform from neutral and Encore Energy (ENP) to neutral from underperform at RW Baird.
• Fluor (FLR) to market perform from underperform at BMO Capital.
• Hornbeck Offshore (HOS) to conviction buy from neutral at Goldman.
• Saks (SKS) and Zale (ZLC) to neutral from underperform at BofA/Merrill.

Chesapeake Energy (CHK) announced it has agreed to sell approximately 487,000 net acres of leasehold and producing natural gas properties in the Fayetteville Shale play to BHP Billiton (BHP) for $4.75 billion in cash before certain deductions and standard closing adjustments. Chesapeake Energy overall option implied volatility of 34 is near its 26-week average, according to Track Data, suggesting non-directional price movement.

CBOE Volatility Index (VIX) was up 27% to 20.94.

Options Update is by stock specialist Paul Foster of theflyonthewall.com.

Here is a game changer. The natural gas market is about to become an export market. The U.S. has abundant natural gas and now two companies plan to take advantage of the opportunity, as reported in the Wall Street Journal (subscription required).

First we have privately owned Freeport LNG Development, working with Australian Macquarie Group (MQBKY), expecting to receive export permits. The company has an import terminal and it plans to add the equipment that will allow it to export as well.

Analyst Upgrades

• Valero Energy (VLO) to outperform from perform at Oppenheimer.
• Changyou.com (CYOU) to overweight from equal weight at Morgan Stanley.
• Albermarle (ALB) to overweight from neutral at JPMorgan.
• ICU Medical (ICUI) to buy from neutral at Roth Capital.
• Check Point (CHKP) to outperform from market perform at Bernstein.
• FMC Corporation (FMC) to buy from neutral at BofA/Merrill.
• Rangold Resources (GOLD) to neutral from sell at Goldman.
• Global Cash Access (GCA) to buy from hold at Duncan-Williams.

CNOOC Limited (CEO) announced that it's buying into several shale oil and gas leases in the U.S. owned by Chesapeake Energy Corporation (CHK) for $570 million. CHK overall option implied volatility of 31 is below its 26-week average of 35, according to Track Data, suggesting decreasing price movement.

Alpha Natural Resources (ANR) and Massey Energy Company (MEE) announced that they signed a definitive agreement for Massey stockholders to receive 1.025 shares of Alpha common stock and $10 in cash for each share of Massey common stock. Massey options were active on Jan. 28 with 134,000 contracts trading and overall option implied volatility at 58, above its 26-week average of 50, according to Track Data.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

Analyst Upgrades

• Research In Motion (RIMM) to buy from hold at Jefferies.
• Citigroup (C) to buy from hold at ISI Group.
• Integrated Silicon (ISSI) to buy from hold at Auriga.
• Kinross Gold (KGC) to outperform from neutral at Credit Suisse.

Chesapeake Energy (CHK) Monday morning was upgraded to outperform from market perform at BMO Capital. The brokerage house cited valuation as the reason for the upgrade, stating that the shares are "attractively priced at three times next year's expected discretionary cash flow compared to a median multiple of around five times at the group's larger peers," according to MarketWatch.

BMO also feels CHK's use of joint ventures to raise cash and finance capital expenditure could lead to higher cash flow yields and returns on capital, MarketWatch reported. Along with the upgrade, the ratings house assigned a price target of $30 per share for CHK.

Freeport McMoRan (FCX) closed at $87.33. Copper is recently up 0.51% to 361.30 according to Bloomberg. FCX is expected to announce Q1 EPS in late April. May put option implied volatility is at 39, August puts are at 40, versus its 26-week of average of 44, according to Track Data, suggesting decreasing price movement.

Chesapeake Energy (CHK) closed at $24.58. CHK is scheduled to report Q1 EPS on May 3. Natural gas is recently down 1.08% to 4.042, according to Bloomberg. May put option implied volatility is at 37, July is at 39, below its 26-week average of 42, according to Track Data, suggesting decreasing price movement.

Update is by Stock Specialist Paul Foster of theflyonthewall.com.