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.

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.

Analyst Upgrades

• Goldman upgraded Jones Lang LaSalle (JLL) to buy from neutral.
• Credit Suisse upgraded Pulte Group (PHM) to neutral from underperform. Note that Citigroup downgraded the stock.
• Ameristar Casinos (ASCA) was upgraded to neutral from sell at Merriman.
• Citigroup upgraded Kimco Realty (KIM) to hold from sell.
• Mistras (MG) was upgraded to buy from hold at KeyBanc.
• Devon Energy (DVN) was upgraded to outperform from neutral at Macquarie.
• Garmin (GRMN) was upgraded to outperform from sector perform at PacCrest.

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.

Analyst Upgrades

• FBR Capital upgraded Nike (NKE) to outperform from market perform. The firm believes the company's momentum is building following the better-than-expected Q3 report and raised its target for the stock to $84 from $67.
• Thomas Weisel upgraded Corning (GLW) to overweight from market weight, citing improving profitability and cash flow trends. The firm has a $24 price target for shares.
• Deutsche Bank upgraded Burger King (BKC) to buy from hold, citing valuation and potential positive catalysts from the bottoming of sales trends and easy comparisons. The firm raised its price target on shares to $24 from $19.
• Broadcom (BRCM) was upgraded to buy from neutral at Goldman.
• Energizer (ENR) was upgraded to overweight from neutral at JPMorgan.
• Guess (GES) was upgraded to buy from hold at Lazard Capital.

Unconventional energy -- which comes from hard-to-get sources like shale -- is red hot. The biggest sign of this is Exxon's (XOM) recent deal to pay $30 billion for XTO (XTO).

As a result, the expectation is that there will be many more deals in the sector. This week Total SA (TOT), which is one of the largest oil companies in the world, agreed to form a joint venture for natural gas with Chesapeake Energy (CHK). The deal may involve as much as $2.25 billion.