From Bankruptcy To Strength: Analyst Eyes Chesapeake Energy's Progress Amid Natural Gas Concerns

  • Stephens & Co analyst Mike Scialla initiated coverage on Chesapeake Energy Corp CHK at Equal-Weight with a price target of $91.
  • The analyst sees that, since emerging from bankruptcy in February 2021, CHK has focused on creating its deep, high-quality Marcellus and Haynesville natural gas assets and returning cash to stockholders. 
  • The analyst notes that CHK's last year payout of 91% of FCF was the second highest in the natural gas peer group.
  • Scialla believes the company is well positioned to pay off its revolving credit debt facility ($1.05 billion at YE22) post divestiture of non-core Eagle Ford assets (with combined net proceeds of $1.7 billion). 
  • The analyst sees a potential downside to 2023 and 2024 natural gas prices, despite well-hedged 2023 gas production, and prefers CHK's peers having natural gas liquids exposure. 
  • Scialla sees a significant decline in near-term natural gas demand and prices weighing on cash flow and EBITDA, as a matter of concern. 
  • The analyst expects EPS of $5.82 for FY23, $6.16 for FY24 and $9.50 for FY25.
  • Price Action: CHK shares are trading lower by 3.00% at $80.00 on the last check Tuesday.
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