Chesapeake Energy Set For Organic FCF Generation: Analyst Predicts Strong Hedge Gains

Benchmark analyst Subash Chandra lowered the price target on Chesapeake Energy Corp CHK to $93 from $107 while maintaining a Buy rating.

The price target cut reflects weak gas and NGL prices and the EF asset sales.

The analyst reduced Q2 EPS, and EBITDA estimates to $0.35 (from $0.70, consensus: $0.41) and $502 million (from $554 million, consensus: $532 million).

Chandra expects a strong quarter for CHK's gas production, with Haynesville volumes projected to negate the impact of declining Marcellus volumes. 

The analyst estimates gas volumes at the high end of the company's Q2 guidance. 

Chandra expects CHK's balance sheet to get a boost from the 2nd EF black oil sale proceeds and projects significant hedge gains of over $200 million and peak capex in Q2.

Also, the analyst expects a lower cost structure in H2 on EF oil sales and the generation of organic FCF supporting dividend payments and share buybacks.

Price Action: CHK shares are trading lower by 1.05% at $80.26 on the last check Monday.