Chesapeake Energy Set To Become Largest Natural Gas Producer In US, Says Analyst

Shares of Chesapeake Energy Corp CHK climbed in early trading on Friday, as oil prices moved slightly higher after the Personal Consumption Expenditures (PCE) Price Index report showed lower inflation in August than expected.

Gas prices are likely to rise over the next few years, and the company will be the largest natural gas producer following the merger with Southwestern Energy Co SWN, according to Roth Capital Partners.

Analyst Leo Mariani initiated coverage of Chesapeake Energy with a Buy rating and price target of $92.

The Chesapeake Energy Thesis: The company’s merger with Southwestern Energy is expected to close early in the fourth quarter this year, Mariani said in the initiation note.

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"CHK has one of the lower cost structures amongst gas-focused E&P companies with pro forma 2025 operating costs of ~$1.26 per Mcfe, which is ~20% below the average of the gas-focused E&Ps in our coverage universe," the analyst wrote.

While the combined company may receive "similar gas pricing as its peers," it is likely to increase "later this decade as existing and future LNG deals kick in, providing upside exposure to international gas prices and ensuring stronger domestic differentials," he added.

CHK Price Action: Shares of Chesapeake Energy were up 3.3% to $82.98 at the time of publication Friday.

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