Chesapeake Energy Corp. is worth twice what Wall Street has built into its stock price, says Aubrey McClendon, Chesapeake co-founder, chairman and chief executive. Just do the math, he told analysts in a recent earnings conference call.

It goes this way:

The reserve value implied by BHP Billiton Petroleum’s planned $4.75-billion cash purchase of Chesapeake’s Fayetteville shale package involves 10% of Chesapeake’s PV-10 proved reserves as of year-end 2010. Using this, the value of Chesapeake’s remaining proved reserves is at least $40 billion, McClendon says.

“That means that all of our unproved resources—that’s 175 Tcf of natural gas and 15 billion barrels of liquids—are valued at absolutely zero at today's Chesapeake market valuation,” he says. “Where else, but at Chesapeake can you acquire resources of this size and quality for free?

“(These are) world-class resources, such as in the Marcellus, Haynesville, Bossier, Barnett, Eagle Ford, Niobrara, Cleveland, Tonkawa, Granite Wash, Mississippian, Avalon, Wolfcamp, Bone Spring and Wolfberry plays—to name just the most well-known of our plays with huge amounts of unrecognized upside.”

McClendon estimates Chesapeake’s unproved reserves are worth some $40 billion. The company also has $6 billion of non-E&P (midstream and oilfield-service) assets, and $4 billion of drilling carries.

“Added all up, I think you can easily confirm asset values of more than $80 billion for Chesapeake.”

He adds that Chesapeake will generate $10- to $11 billion of EBITDA in 2015, based on accelerated developmental drilling of liquids-rich plays.

“If we are able to do so, then we should be able to increase our enterprise value to a range of $70- to $80 billion versus our current enterprise value of about half that. We have the strategy, the land, the science, the people and the capital to achieve this goal and I believe we will achieve it.”

For example, he says, Chesapeake doubled its oil production in one year—from 30,000 barrels per day in the fourth of quarter 2009 to 60,000 in the past quarter. It grew reserves by 5.1 trillion cubic feet equivalent at a cost of $1.07 per thousand equivalent in 2010.

“That means that, in just one year and just through the drillbit, we found more reserves than any of these highly regarded companies have built up in their entire history: Range (Resources Corp.), Ultra (Petroleum Corp.), Southwestern (Energy Co.), Newfield (Exploration Co.) and Petrohawk (Energy Corp.), to name a few.”

–Nissa Darbonne, Editor-at-Large, Oil and Gas Investor,, Today, Oil and Gas Investor This Week, A&D Watch,, Contact Nissa at

Note: Quotes from this conference call are from’s file of transcripts. For the entire transcript, see