Sterne Agee Maintains Buy on Chesapeake Energy after Updated Guidance

Sterne Agee has published a research report on Chesapeake Energy

after the company updated its guidance. In the report, Sterne Agee writes, "We estimate Chesapeake will generate $4.9 billion in discretionary cash flow this year, which will be augmented by $10 billion in asset sales (Permian Basin sale, Mississippi Lime joint venture, Anadarko Basin financial transaction, VPP #10, other sales). This cash will fund a $7.25 billion drilling program, $1.4 billion in acreage purchases and $3 billion in non-E&P spending. Using these metrics, we project positive free cash flow of $3.2 billion in 2012, of which ~$1.1 billion will be earmarked to debt reduction. In summary, we believe that the funding fears are overblown, and that even if potential oilfield service monetization proceeds fall short of expectations, the company should hit its target." Sterne Agee maintains its Buy rating and $35 price target on Chesapeake Energy, which closed yesterday at $24.98.