Why Chesapeake Energy (CHK) Is Up Today

NEW YORK (TheStreet) -- Chesapeake Energy  (CHK) was rising 2.63% to $27.27 on Monday after the second-largest natural gas producer in the U.S. announced it is considering selling or spinning off its oilfield services unit, Chesapeake Oilfield Services.

The unit had sales of about $2.2 billion last year and could stand as its own compay, Chesapeake Energy said in a statement. Chesapeake Oilfield Services earns about 35% of its revenue from contracts with companies other than its parent company, Chesapeake Energy.

Chesapeake Oilfield Services "will offer Chesapeake and its shareholders enhanced return opportunities as a stand-alone company," said Chesapeake Energy CEO Doug Lawler in the statement. "A separation of COS is aligned with our strategies of financial discipline and profitable and efficient growth from captured resources."

Chesapeake Energy announced earlier this month that it plans to reduce capital spending by approximately 20% in 2014 and will pursue more asset sales as it deals with a funding gap of approximately $1 billion in 2014.

Chesapeake Oilfield Services owns nine hydraulic fracturing fleets, rents oilfield equipment and operates 260 rig relocation trucks, along with 67 cranes and forklifts and 246 fluid hauling trucks.

TheStreet Ratings team rates CHESAPEAKE ENERGY CORP as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHESAPEAKE ENERGY CORP (CHK) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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