Credit: Shutterstock photoSummary:
We are downgrading our recommendation on Chesapeake Energy shares to Underperform from Neutral. The company reported weak third quarter earnings, due mainly to lower price realizations. Its focus on the liquid-rich plays like Utica Shale is expected to contribute highly to the company's growth momentum. Going forward, Chesapeake expects receding operating costs, lower expected commodity prices, and increased production. Although we appreciate management's execution and ongoing cost reduction initiatives, we believe billions in asset sales are required to fund this program. Chesapeake also exhibits a weak financial profile with a huge debt balance. Chesapeake is trying hard to minimize capital expenditure through its divestiture program.
Overview:
Oklahoma-based Chesapeake Energy Corporation (CHK) is an independent oil and gas company engaged in the acquisition, development, and production of onshore U.S. natural gas resources. The company has grown rapidly and is now the second largest natural gas producer in the U.S. It is also the tenth largest producer of oil and natural gas liquids in the U.S. Chesapeake is noted for growth by acquisition. The company has also demonstrated considerable drilling prowess, capitalizing on its extensive inventory of acquired undeveloped acreage to make substantial reserve additions.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
