- Chesapeake Energy (CHK -1.2%) is downgraded to Sell from Hold with a $2 price target at Jefferies, which says it is wary of CHK's valuation and leverage, among other factors.
- While CHK has made great strides to simplify its corporate structure and asset base, Jefferies says the company remains weighed by a ~$9B debt load, high fixed cost burden and comparatively weak inventory of high return drilling inventory; the firm notes CHK's discouraging recent commentary on excess amounts of produced water on Oklahoma assets, since it was an asset that CHK had highlighted in a late 2016 analyst day.
- On the flip side, the firm upgrades Concho Resources (CXO +0.4%) and Devon Energy (DVN +1.3%) to Buy from Hold, citing CXO's "enviable" scale relative to other Permian Basin operators and DVN's "ultra-long inventory life" in its two core areas of operations, the Delaware Basin and the STACK, "where there are enough high-quality locations for decades of drilling."
- Jefferies favorite E&P stocks are CXO, Diamondback Energy (FANG +0.8%), Callon Petroleum (CPE +1.6%), RSP Permian (RSPP +1.9%) and Consol Energy (CNX -0.4%).
- Now read: Chesapeake Energy Downside Target Hit, Insider Buying Could Mark Bottom
Original article