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."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CHK's very impressive revenue growth greatly exceeded the industry average of 3.3%. Since the same quarter one year prior, revenues leaped by 63.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 107.52% and other important driving factors, this stock has surged by 31.66% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CHK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 110.0% when compared to the same quarter one year prior, rising from -$2,013.00 million to $201.00 million.
- Net operating cash flow has increased to $1,356.00 million or 43.94% when compared to the same quarter last year. In addition, CHESAPEAKE ENERGY CORP has also vastly surpassed the industry average cash flow growth rate of -51.05%.
- You can view the full analysis from the report here: CHK Ratings Report