Chesapeake Energy Gets Double-Notch Upgrade At Sterne Agee CRT; 'Issues Not Fatal'

In a report published Monday, Sterne Agee CRT analyst Tim Rezvan upgraded the rating on

from Underperform to Buy, while raising the price target from $9 to $13. Although the stock is "oversold," the analyst believes that the issues facing the company are "not fatal." The stock has been underperforming its peers since March, with the share price declining 21 percent since March 18. "We argue investors would be late to the short-selling party at this level. Recent short interest data shows short interest of 162 million shares, versus 661 million basic shares outstanding and 70 million shares sold short at the end of February," Rezvan stated. In recent weeks, the management has suggested that Chesapeake Energy is "aggressively pursuing" ways to continue to contract with

, while making the obligating terms more effective. Discussions regarding the contract include issues such as gathering fee, along with a gathering commitment worth $1.86 billion during 2016-2019 in the Haynesville and Barnett Shales. "We believe any positive traction on this front would ease investor angst on the current liquidity drain and reset CHK shares higher," according to the Sterne Agee CRT report. The company believes that Chesapeake Energy could have liquidity worth $6 billion by the end of 2015, even in the absence of potential asset sales or modified midstream obligations. "By pulling the brakes so hard on production growth this year, the company will be fighting a more modest decline of base production in 2016, creating a pathway for a more mute overspend. Our reconfigured 2016 spending outlook suggests $4.7 billion of liquidity at y/e 2016," Rezvan added.