Oppenheimer: We're Downgrading Chesapeake Energy On 'Growing Losses And Cash Flow Deficit'

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In a report published Thursday, Oppenheimer analyst Fadel Gheit downgraded the rating on
Chesapeake Energy Corporation
CHK
from Outperform to Perform, citing the negative impact on earnings and cash flow from lower oil and gas prices and lower production. Chesapeake Energy reported its adjusted EPS for 1Q15 at $0.11 share, beating the consensus estimate of $0.03. Despite the beat, the figure represented a 82 percent YoY decline and a 3 percent sequential decline. A decline in unhedged prices was partly offset by hedging gains and higher production volume. Chesapeake Energy's production has been impacted by asset sales and sharply lower capital spending. It averaged 686 mboed, up 2 percent YoY, but down 6 percent sequentially. Realized prices averaged $22/boe, down 30 percent YoY and down 2 percent sequentially, including $7.04/boe hedging gain. In the report Oppenheimer noted, "Based on the future strip benchmark oil and gas prices, we expect CHK to report losses of $544M this year and $833M next year, or $0.48/share and $0.84/ share, respectively. We expect operating cash flow of $2.1B this year and $1.5B next year. Assuming CAPEX of $3.7B, annual dividends of ~$230M and preferred dividend of ~$220M, we expect free cash flow deficits of $2.1B and $2.7B, respectively."
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Posted In: Analyst ColorDowngradesAnalyst RatingsOppenheimer
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