Drilling Deep: Analyst Outlines Chesapeake Merger Synergies, Delays Due To Regulatory Risks


Keybanc Capital Market analyst Tim Rezvan initiated coverage on Chesapeake Energy Corporation CHK at Sector Weight rating.

The rating reflects the near/medium-term outlook for natural gas. The analyst says management is acting prudently by curtailing production amid weak prices. 

The analyst writes that significant synergies can be extracted from the Southwestern merger and believes management is proving to be a first-mover with its push to gain exposure to international natural gas benchmarks for 15%-20% of its marketed gas. 

Also Read: Natural Gas Price Rallies After Chesapeake Energy Lowers Output

However, the analyst sees legitimate regulatory risks related to the Southwestern merger

Also, Rezvan is concerned about degradation trends in the Marcellus and the Haynesville assets.

The analyst says the continuing delays on LNG export projects, L48 volume growth, and higher gas volumes from mature oil shale basins create less certainty that prices are expected to reset higher as LNG exports double to 25+ Bcf/d, possibly by 2028.

Overall, the analyst estimates EBITDA of $3.180 billion (26% above cons.) for 2024 and $5.182 billion ( 6% above street view) for 2025.

Investors can gain exposure to the stock via Invesco Energy Exploration & Production ETF PXE and Texas Capital Funds Trust Texas Capital Texas Oil Index ETF OILT.

Price Action: CHK shares are down 0.34% at $89.99 on the last check Thursday.

RelatedChesapeake Energy’s Strategic Merger with Southwestern Energy Wins Analyst Endorsement: Upgraded Ratings and Anticipated Market Dominance

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