Chesapeake Energy (CHK): Barnett Asset Sale a Positive, No Change To Underperform - Jefferies
- Wall St. rises amid robust GDP data, mixed earnings
- ExxonMobil (XOM) Tops Q3 EPS by 5c; CapEx Light of Views
- Baker Hughes (BHI), General Electric (GE) in Partnership Talks, Not Merger Talks
- AbbVie (ABBV) Tops Q3 EPS by 1c; Boosts FY16 EPS Outlook
- Amazon.com (AMZN) Misses Q3 EPS by 26c, Offers Q4 Guidance
Find out which companies are about to raise their dividend well before the news hits the Street with StreetInsider.com's Dividend Insider Elite. Sign-up for a FREE trial here.
Jefferies analyst, Jonathan Wolff, reiterated his Underperform rating on Chesapeake Energy (NYSE: CHK) noting that after the close, CHK announced that it had entered into a transaction to transfer its Barnett shale acreage/production to a newly established PE-backed producer. Due to the large remaining minimum volume commitments (MVCs) associated with the midstream contracts, the midstream contract holder Williams Partners (WPZ) will receive $754 MM in cash. WPZ says they are essentially being made entirely whole on an NPV basis, with cash payments of $334 from CHK and $420 MM from the PE entity.
The Barnett assets included 215,000 net acres with production of ~65 mboe/d (96% gas, 4% NGLs) and 81 MM boe of total reserves. The assets had a negative cash flow and CHK has an MVC shortfall on the asset. Post-transaction CHK estimates that operating income will increase by $200- $300 MM/annually from 2016-2019.
CHK also released preliminary guidance for 2017, including “wide initial ranges for production and capital spending” to allow for flexibility around commodity prices. The initial budget of $1.6-$2.4 B (excluding capital interest of $200 MM) with adjusted production of roughly -2% to -6% declines.
No change to the price target of $4.00.
CHK reached a deal to fully exit its Barnett position enabling it to shed large future contracted midstream liabilities. CHK will provide WPZ with a $400 MM cash payment and transfer its whole Barnett position without remuneration to a private company. Disclosures indicate near-term cash flow accretion and provides a further beam of light for CHK's long-term survival.
Shares of Chesapeake Energy closed at $4.80 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Jefferies Raises Price Target on Bristol-Myers Squibb (BMY) Following 3Q
- Jefferies Cuts Price Target on W.R. Grace & Co. (GRA); Reiterates Buy
- Oppenheimer Raises Price Target on Vocera Communications, Inc. (VCRA) to $22
Create E-mail Alert Related CategoriesAnalyst Comments
Related EntitiesJefferies & Co
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!