The shares of Chesapeake Energy received a stock rating upgrade from Sterne Agee CRT Analyst Tim Rezvan on Monday.
In a note to investors, Resvan issued a Buy rating for the shares of Chesapeake Energy citing the reason that the issues confronting the energy company are “not fatal”. The analysts previously had an Underperform rating on the stock.
Rezvan also increased his price target for the shares of Chesapeake Energy from $9 to $13 per share.
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Chesapeake Energy short interest
Rezvan issued a bullish recommendation on Chesapeake Energy’s stock even if it is currently oversold. According to him, “We argue investors would be late to the short-selling party at this level. Recent short interest data shows short interest of 162 million shares, versus 661 million basic shares outstanding and 70 million shares sold short at the end of February,”
Over the past few weeks, the management of Chesapeake Energy indicated that the company is “aggressively pursuing” initiatives to continues its agreement with Williams Companies while making the obligating terms more effective.
Chesapeake Energy’s contract discussions with Williams Companies include some issues including gathering fee and a gathering commitment worth $1.86 billion from 2016 to 2019 in the Haynesville and Barnett Shales.
Rezvan commented, “We believe any positive traction on this front would ease investor angst on the current liquidity drain and reset CHK shares higher.”
Chesapeake Energy estimated liquidity
Chesapeake Energy is expected to have $6 billion of liquidity by the end of 2015 even if it would not sell some assets or modify its midstream obligations
In addition, Rezvan said, “By pulling the brakes so hard on production growth this year, the company will be fighting a more modest decline of base production in 2016, creating a pathway for a more mute overspend. Our reconfigured 2016 spending outlook suggests $4.7 billion of liquidity at y/e 2016.”
The shares of Chesapeake Energy increased 2.15% to $11.40 per share earlier today. The stock lost some of its gains, trading at $11.09 per share around 3:08 in the afternoon in New York.
Chesapeake Energy lost more tan 43% of stock value year-to-date. Its shares traded between $10.94 and $31.10 per share over the past 52-weeks. The decline was primarily caused by the growing concern regarding the oversupply of natural gas.