Chesapeake Has A 'Reshaped Growth Profile'

Wunderlich’s Jason Wangler believes that Chesapeake Energy Corporation CHK “is close to growing production again while well results and asset sales could provide value-added catalysts.”

The analyst maintains a Buy rating on the company, with a price target of $10.

Solid Q4

Chesapeake Energy reported robust fourth-quarter 2016 results, with EPS at $0.07, ahead of the estimate and in line with the consensus, along with higher than expected production and revenue in line with expectations.

“Much of this was not a surprise given the fact that the company held an analyst day during 4Q16 and also provided an update just last week, but CHK continues to provide incremental guidance that helps shape its future,” Wangler mentioned.

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Reshaping Growth

The analyst noted that the “shape” of Chesapeake Energy’s production has been altered, given the company’s lower than expected first-quarter 2017 guidance. However, the full-year guidance has been reaffirmed, which positions Chesapeake Energy well for 2018.

“With less production early in the year, the guidance is a bit back-end loaded and this means CHK could be back to growth in 2Q17 and 2H17 production is higher than forecasted. This reshaped curve could prove valuable heading into 2018 as CHK looks to grow 5–15 production per year,” Wangler explained.

Back To Growth

The analyst believes that the company is only months from returning to the type of growth profile that it has not been able to consistently see for some time.

“This growth should be driven by CHK's oily plays like the Eagle Ford, Mid-Continent, and Powder River Basin and we look for well results from these regions to help provide a line-of-sight to its future growth,” Wangler stated.

In addition, continued improvements in the midstream segment is expected to bolster pricing going forward.

At last check, shares of Chesapeake Energy were up 1.22 percent at $5.82.