Chesapeake Management Is Smarter Than You Think: Wunderlich

• Chesapeake Energy Corporation CHK shares are down nearly 60 percent year-to-date, despite gaining 4 percent since September 2.
• Wunderlich’s Jason A Wangler maintained a Buy rating for the company, with a price target of $13.
• The company’s efforts to cut gas transportation costs should bode well for the company, Wangler believes.

Chesapeake Energy announced the signing of agreements with Williams Companies Inc WMB to significantly cut its natural gas transportation costs.

The company expects to see $0.20/mcf reductions in cost in the Haynesville and $0.25/mcf reductions in cost in the Utica for its produced gas, analyst Jason Wangler said. He added that the cuts seemed quite material as the company is believed to be paying about $0.90/mcf at present.

Although Chesapeake Energy agreed to some additional terms in return for the reduction in gas transportation costs, these deals are expected to result in a drastic improvement in the company’s cost structure and the economics of its drilling program, besides allowing the company to get more active.

As part of these deals, the company has also committed to bringing on 140 Haynesville wells by yearend 2017. Wangler believes that this “should boost volume in the region.”

In the report Wunderlich noted, “We remain bullish on CHK's assets and believe that management continues to navigate tough internal and external factors quite impressively.”

Chesapeake Energy’s management continues to address and improve the various issues being faced by the company, making it stronger over time, Wangler added.