From Barron's Stocks to Watch:
Chesapeake Energy: Worth Just $1?
Barclays analyst Thomas Driscoll and team argue that Chesapeake Energy (CHK) is still worth just a buck a share despite its better-than-expected earnings and recent asset sales:
Asset sales, a stronger outlook for cash flow and falling debt improve Chesapeake’s outlook – but do not justify a premium multiple to peers. Chesapeake reported strong Q1 results along with a $470 million asset sale. Chesapeake has now announced $1.2 billion of asset sales this year with only a modest negative impact on production. We estimate Chesapeake trades at a 5-10% premium to peer group multiples of mid-cycle debt-adjusted cash flow…
Chesapeake trades at a debt-adjusted cash flow multiple of 8.5x mid-cycle estimates – a 5- 10% premium to peers using market prices for the convertible pref notes....MORE