Analysts at Wunderlich Securities are confident that the triumvirate CEO of Chesapeake Energy Corporation (NYSE:CHK) composed of its chairman, chief financial officer, and chief operating officer who will lead the company temporarily are capable of executing its debt reduction plan effectively, and achieve the proper value for the shares of the company.
The analysts believe that the stock price of Chesapeake Energy Corporation (NYSE:CHK) is worth more than its current trading price at around $19.97 per share. The second largest natural producer in the United States is currently searching for a permanent CEO to lead the company after Aubrey McClendon official retired from his position as expected. The company announced McClendon’s decision to retire from the company last January. Under his leadership, Chesapeake Energy has been involved with many controversies and he was considered as one of the worst CEOs in 2012.
Despite the controversies, Liam Denning of Wall Street Journal noted that Mc Clendon contributed in the revival of the economy of the United States as he pioneered the shale oil industry. Mc Clendon was instrumental in the shale boom that reversed the declining oil and natural gas production in the country. According to analysts, Mc Clendon’s initiative helped narrow the U.S. trade deficit.
According to Wunderlich Securities analysts, the retirement of McClendon from Chesapeake Energy Corporation (NYSE:CHK) strengthens the implementation of the asset sales and debt reduction plan of the company citing that its three executives have extensive management experience.
The analyst believe that it would take time for Chesapeake Energy Corporation (NYSE:CHK) to find a qualified executive to serve as permanent CEO of the company due the large supply of E&P leadership roles, the seeming lack of quality individuals to assumed the positions, as well as the controversies surrounding the company is hampering the search.
The analysts also noted that the company’s operation is demonstrating a positive trend. Chesapeake Energy Corporation (NYSE:CHK) managed to achieve its production targets while coming in below budget on CapEx and G&A costs. According to them, the company’s cash flow is moving in the right direction as the price of natural gas going up at around $4/mcf.
According to them, the Chesapeake Energy Corporation (NYSE:CHK)'s strategy in keeping or holding its core acreage through production, drilling or lease extension while aiming to monetize the remaining areas to streamline operations to generate cash is a good move. The analysts said. "We like these moves as it should create a more efficient company with stronger financials that continues to grow production (especially liquids).”
The analysts reiterated their buy rating and $25 price target for the shares of Chesapeake Energy Corporation (NYSE:CHK). According to them, their computation for the price target represent a 20% discounted multiple of 3.8X.