UBS Raises Price Target on Chesapeake Energy (CHK) to $4.25; Reiterates Sell
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UBS maintained a Sell rating on Chesapeake Energy (NYSE: CHK), and raised the price target to $4.25 (from $4.00), following the company's 2Q earnings report. CHK adjusted its 2016 production guidance from 625-650 MBoed to 611-638 MBoed and provided initial 2017 volume guidance of 532-562 MBoed.
Analyst William Featherston commented, "CHK agreed to convey its Barnett assets to First Reserve-backed Saddle Barnett Resources. In conjunction, it agreed with Williams Partners to terminate its current gathering agreement, projected MVC shortfall payments, & Barnett fees by paying $334MM, with Saddle expected to pay WPZ another $420MM. CHK will also pay WPZ $66MM to reduce its Mid-Continent cost-of-service gas gathering agreement to a fixed-fee arrangement, expected to reduce its Mid-Continent gas gathering cost by 36% starting 3Q16. To partially fund its $400MM total payment to WPZ, CHK sold a long-term gas supply agreement with a $4/MMBtu floor pricing for $146MM. The deals add $550MM of NAV at a cost of $400MM, boosting NAV by ~$0.20/share."
Shares of Chesapeake Energy closed at $4.80 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst PT Change
Related EntitiesUBS, First Reserve Corporation, Earnings
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