How Will Chesapeake Energy (CHK) Stock React To Its $1.26 Billion Share Repurchase Plan?

NEW YORK (TheStreet) -- Chesapeake Energy Corp. (CHK) announced on Tuesday that it will spend $1.26 billion to repurchase all of the outstanding shares of its unrestricted subsidiary CHK Utica LLC.

The natural gas and oil exploration and production company said the transaction is expected to close today, and it will retire Chesapeake's highest cost leverage instrument, and eliminate approximately $75 million in annual cash dividend payments to third party preferred shareholders.

Chesapeake also announced an acreage exchange with the privately held RKI Exploration & Production LLC in the Powder River Basin in Wyoming.

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The company said it would pay $450 million to RKI and give the company 137,000 net acres and its interest in 67 gross wells in the northern part of the basin.

In exchange, RKI will give Chesapeake close to 203,000 net acres and interest in 186 gross wells in the southern region of the basin.

Shares of Chesapeake Energy are up 0.26% to $26.91 in mid-morning trading on Tuesday.

Separately, 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 several positive factors, 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, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 47.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CHESAPEAKE ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, CHESAPEAKE ENERGY CORP turned its bottom line around by earning $0.68 versus -$1.62 in the prior year. This year, the market expects an improvement in earnings ($2.03 versus $0.68).
  • 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 632.8% when compared to the same quarter one year prior, rising from $58.00 million to $425.00 million.
  • Net operating cash flow has increased to $1,291.00 million or 39.71% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 16.72%.
  • You can view the full analysis from the report here: CHK Ratings Report
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