Wachovia Highlights Takeaways from Chesapeake (CHK) Analyst Conference

Wachovia is out with a research note this morning highlighting key takeaways from a Chesapeake Energy (NYSE: CHK) analyst conference held on Wednesday and Thursday. Following the event, the firm maintains its Outperform rating and $44-$48 valuation range on Chesapeake.

The firm says that Chesapeake reiterated the same message that it issued last Friday: that its covenants look fine and that it has about $1.1 billion of cash on hand. Chesapeake's management also indicated that it has numerous asset sales planned for Q4. Wachovia points out that investors will be watching Chesapeake's year-end cash levels very closely, and believes that if management can't deliver the cash balance it previously promised, "investors will shoot first and ask questions later."

Despite the positive operational overview, which Wachovia says was focused on the Haynesville region, the firm believes that investors do not "feel an urgency to buy shares" of Chesapeake today. Although Chesapeake's stock price does not reflect true underlying value, according to Wachovia, the firm says "Balance sheet and asset sale timing create higher risk than peers, so think near-term investors will continue to play the perceived 'safer' large-cap E&P."

Shares of Chesapeake are indicated about 1.2% lower this morning. With the stock trading around $18.10, Wachovia's valuation range represents potential price appreciation of more than 150% from current levels.

Chesapeake Energy Corporation, an oil and natural gas exploration and production company, engages in the acquisition, exploration, and development of properties for the production of crude oil and natural gas from underground reservoirs.

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