Citigroup Raises PT on Chesapeake Midstream Partners to $34

Citigroup has published a research report on Chesapeake Midstream Partners CHKM and has raised the price target from $31 to $34. In the report, Citigroup writes, "CHKM announced its 2nd dropdown from CHK, its GP, for $865 million. The acquisition of Appalachia Midstream Services, LLC (AMS) puts CHKM into the Marcellus with one of the largest gathering systems in the region by throughput. It encompasses an avg. 47% interest in ten distinct systems across the North (dry gas) and South (liquids rich) regions of the basin, provides dedicated acreage for future expansions, and increases CHKM's 3rd party volumes to 30% from 17%. Cash flows are initially supported by EBITDA commitments of $100 mil in ‘12 and $150 mil in ‘13, as well as 15-year fee-based gathering contracts w/ annual fee redeterminations that target a mid-teens ROI on future growth investment." Citigroup maintains its Buy rating on Chesapeake Midstream Partners, which closed yesterday at $28.52.