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:
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. This multiple has fallen sharply as a result of the additional $470 of asset sales that were announced, an increase of ~$700 mm in 2016-2017 cash flow estimates and a 16% increase in 2018 cash flows. If we were to use the face value of the convertible preferreds, the premium rises to 20-25%. While we applaud the progress Chesapeake has made, we believe a premium multiple is unwarranted. We are trimming our target multiple to maintain our $1 price target.