Does Chesapeake Have Upside?

In a report published Tuesday, SunTrust Robinson Humphrey analysts maintained a Buy rating on

. Chesapeake has further trimmed its capex budget for this year in the wake of continued weakening in commodity prices. While stating that the company is likely to have "substantial liquidity" of more than $5B at yearend, the analysts added that the "rates of return in some areas" could still be struggling to compete for capital. This could be "a key driver of the budget cut," since the company expects to run 10 less rigs than previous guidance. In the report, SunTrust Robinson Humphrey mentioned the following highlights: • The company has lowered its 2015 total capex budget from the previous guidance of $4.0-$4.5B to $3.5-$4.0B. This compares with SunTrust Robinson Humphrey's (STRH) estimate of $3.6B and consensus of $4.2B. • The 2015 production guidance has been cut from 645-655 Mboe/d to 635-645, versus STRH estimate of 652 Mboe/ d and consensus of 655 Mboe/d. • 2015 oil production lowered from 39-40 Mmbbls to 38-39 Mmbbls, versus STRH estimate of 40 Mmbbls. • 2015 NGL production remains at 23-24, versus STRH estimate of 24 Mmbbls. • 2015 gas production cut from 1,035-1,055 Bcf to 1,020-1,040 Bcf, versus STRH estimate of 1,048 Bcf. • The company plans to operate 25-35 rigs in 2015, as compared to the prior guidance of 35-45 rigs and an average of 64 rigs in 2014, representing a 55% decline. • The company expects to spud/connect and connect 520/650 gross operated wells in 2015, 1-3% higher than 2014 production.