Chesapeake Energy Corporation
) outlook was raised to stable from negative by Moody's Investors
Service. The favorable revision reflects the rating agency's
bullishness about the company's potential to improve its leverage
metrics via production growth and debt reduction. Moreover,
Moody's assigned a Ba2 Corporate Family Rating.
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Moody's is resting its case on the premise that Chesapeake would
strengthen its leverage metrics through a combination of reserve,
production growth and debt reduction. The rating agency feels the
company has made significant progress in reducing its capital
spending, hedging its natural gas exposure and increasing
However the rating agency is still apprehensive of Chesapeake's
high debt level and structural complexity arising out of a spate
of acreage acquisitions and capital spending in excess of cash
Chesapeake's decent profits in the recently reported first
quarter encourage us to see a growth potential in the company.
However the issue of high debt level still plagues its books.
Chesapeake Energy is an independent oil and gas company engaged
in the development, exploration, acquisition and production of
onshore natural gas and oil reserves. The company owns interests
in producing oil and gas wells concentrated in three primary
operating areas: the Mid-Continent region of Oklahoma, western
Arkansas, southwestern Kansas and the Texas Panhandle; the Gulf
Coast region; and the Helmet area of northeastern British
Columbia. Chesapeake is the second largest U.S. natural gas
The company currently retains a Zacks Rank #3 (Hold), implying
that it is expected to perform in line with the broader U.S.
equity market over the next 1 to 3 months. However, there are
other stocks in the oil and gas sector -
EPL Oil & Gas, Inc.
) - which hold a Zacks Rank #1 (Strong Buy) and are expected to
outperform the equity market.