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Chesapeake Downgraded by Moody's on Soft Crude Pricing

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Chesapeake Energy Corporation 's CHK outlook was downgraded to negative from stable by Moody's Investors Service. The revision reflects the rating agency's apprehensions pertaining to low natural gas and oil prices . Also, Moody's has downgraded Chesapeake's Corporate Family Rating (CFR) to Ba2 from Ba1 and its senior unsecured notes ratings to Ba3 from Ba1.

Credit rating downgrade from a reputed agency like Moody's has its implications as it limits borrowing capacity. The rating agency is apprehensive that the persistent fall in oil, natural gas and natural gas liquids (NGL) prices will substantially reduce Chesapeake's cash flow over the remainder of 2015 and throughout 2016 as its commodity price hedges roll off.

As of Sep 30, 2015, Chesapeake had $12.0 million in outstanding letters of credit under its credit facility. The company is reducing capital spending to keep it within cash flow by the end of this year and plans to appropriately maintain a sizable cash balance for liquidity needs.

Chesapeake Energy is the second-largest producer of natural gas and the twelfth-largest producer of oil and natural gas liquids in the U.S. Headquartered in Oklahoma City, the company's operations are focused on discovering and developing its large and geographically diverse resource base of unconventional oil and natural gas assets onshore U.S. The company also owns a substantial marketing and compression businesses.

Chesapeake is an independent oil and gas company engaged in the acquisition, development, and production of onshore U.S. natural gas resources. The company has grown rapidly and is now the second-largest natural gas producer in the U.S. It is also the eleventh-largest producer of oil and natural gas liquids in the U.S. Chesapeake is noted for growth by acquisition. The company has also demonstrated considerable drilling prowess, capitalizing on its extensive inventory of acquired undeveloped acreage to make substantial reserve additions.

The company currently carries a Zacks Rank #3 (Hold). However, there are other stocks in the oil and gas sector - Alon USA Partners, LP ALDW , Braskem S.A. BAK and ReneSola Ltd SOL - which hold a Zacks Rank #1 (Strong Buy) and are expected to outperform the equity market in the near term.

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CHESAPEAKE ENGY (CHK): Free Stock Analysis Report

RENESOLA LT-ADR (SOL): Free Stock Analysis Report

BRASKEM SA (BAK): Free Stock Analysis Report

ALON USA PTNRS (ALDW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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