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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: pcyhuang who wrote (176205)	2/22/2013 6:46:44 AM
From: Dennis Roth	2 Recommendations Respond to of 206087

Chesapeake Energy Corp. (CHK) Getting Its House in Order; Revising Estimates From Credit Suisse Our take: CHK is making some small steps in the right direction, but it is not there yet. While we are encouraged by the apparent spending discipline, focus on operational efficiencies, and additional hedges, the fact remains that the company still has a $3.5 billion funding gap in 2013 with an aggressive asset sale target. Trading at a premium cash flow multiple and at only a slight discount to our NAV, we maintain our Neutral rating and $22 target price. Estimate revision: We are revising our 2013 EPS estimates to $1.16 from $1.27 to incorporate some slightly higher cost assumptions as well as a smaller contribution from its oilfield service business. We are raising our 2014 EPS estimates to $2.23 from $2.16. Two quarters doesn't make a trend, but gotta start somewhere. For the second consecutive quarter, CHK was able to maintain the same 2013 production and capex guidance, a welcome improvement from the changes that had become all too commonplace. If the company can hold their rig count at current levels, a $6 billion drilling and completion spending budget should be achievable. There is no ethane rejection assumed in CHK's guidance, so that could prove to be a headwind this year to its liquids guidance. Gas hedges suggest near-term concerns on gas fundamentals. For the time being, it appears that CHK has abandoned its previous bullish stance on gas, announcing significant new natural gas hedges. Over the past three months, the company has hedged 50% of its 2013 gas volumes at $3.62 per Mcf, which is notable as CHK was previously unhedged on gas. On the oil side, CHK has now hedged 85% of its oil volumes at a NYMEX price of $95.45/bbl versus 69% at a $96.01/bbl reference price last quarter. In total, 72% of the company's total 2013 production is hedged, which provides important downside protection. Click on me for Full Note 11 pages