Market Overview

Chesapeake's $2B Asset Sale Dissolves BofA's Bearish Thesis

Share:
Chesapeake's $2B Asset Sale Dissolves BofA's Bearish Thesis
Related CHK
56 Biggest Movers From Yesterday
Mid-Afternoon Market Update: SMART Global Holdings Falls On Downbeat Earnings; Diebold Nixdorf Shares Jump
Positive Outlook For Chesapeake Energy (Seeking Alpha)

Chesapeake Energy Corp. (NYSE: CHK) announced the sale of its Ohio oil and gas holdings on Thursday. 

The Analysts

Bank of America Merrill Lynch analyst Doug Leggate upgraded Chesapeake from Underperform to Neutral with a price target lifted from $4 to $6. 

The Thesis

Chesapeake’s announcement of the $2-billion sale of its Utica assets drove BofA's upgrade, Leggate said in the Friday upgrade note. (See the analyst's track record here.)

The transaction "is a significant turning point that delivers promised reduction in debt and allows the market to refocus on its underlying assets," the analyst said. 

Chesapeake should generate free cash flow in 2019 for the first time in several years due, Leggate said.

The Powder River basin is becoming the company's oil growth driver, he said; Chesapeake recently disclosed well production plans in the basin that are ahead of schedule and demonstrate a positive outlook for overall production in 2019.

"In summary, we believe the worst has passed for Chesapeake. CHK will still have poor balance sheet metrics for the time being that will keep the shares amongst the more volatile of the large cap U.S. oils," the analyst said. 

Chesapeake remains a "gas-levered" stock, with 73 percent of post-sale production being in natural gas, according to BofA. 

Price Action

Chesapeake shares were rallying 12.16 percent to $4.94 off the open Friday. 

Related Links:

TD Ameritrade Traders Adopt Some Old And New Approaches To The Trade War Market In June's IMX

Chesapeake Energy Common Stock Rally Received A Shot Of Adrenaline

Latest Ratings for CHK

DateFirmActionFromTo
Jan 2019Raymond JamesMaintainsOutperformOutperform
Dec 2018JP MorganDowngradesNeutralUnderweight
Nov 2018CitigroupUpgradesSellNeutral

View More Analyst Ratings for CHK
View the Latest Analyst Ratings

Posted-In: Bank of America Merrill Lynch Doug LeggateAnalyst Color Upgrades Price Target Commodities Markets Analyst Ratings Best of Benzinga

 

Related Articles (CHK)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MDRXKeyBancUpgrades0.0
ANETNomuraUpgrades260.0
CNPRBC CapitalUpgrades34.0
FISVOppenheimerUpgrades88.0
FNDUBSUpgrades37.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

TOP 3 Price Predictions For Bitcoin, Ethereum, Ripple: Altcoins Lose A Bullish Opportunity, But It Can't Last Forever...

Benzinga's Top Upgrades, Downgrades For July 27, 2018