Hard at work: Chesapeake
Chesapeake loses conviction buy spot
Goldman Sachs removed Chesapeake Energy from its Americas conviction buy list, citing the company's underperformance in comparison to other exploration and production, and coal stocks under its coverage.
However, the brokerage maintained a "buy" rating on the natural gas company, and said asset sale news and lower spending in the next three to six months could allow Chesapeake shares to recover.
"We believe relative to other exploration and production companies that valuation is attractive and that shares can rebound even before second-quarter earnings results are released," Reuters quoted Goldman saying in a note to clients.
The brokerage also said it expects lower capital spending from the second quarter to the fourth quarter as a result of reduced overall rig count, increased costs covered by joint venture partners and less acreage acquisitions.
Chesapeake, which went on a spending binge last year to secure the right to drill in shale plays like Haynesville in Louisiana, said it has reduced its 2009 and 2010 drilling budget 8% to $6 billion.
Goldman said it continued to view the company's exposure to the Haynesville, Marcellus, Fayetteville and Barnett shale plays favorably, and said recent results from the Marcellus Shale were better than expected.
Chesapeake shares closed at $20.40 Tuesday on the New York Stock Exchange.