Dallas, Texas 07/08/2015 (Financialstrend) – Chesapeake Energy Corporation (NYSE:CHK) had one of its best days in the market on Tuesday seen by the stock surging by more than 10% after weeks of plunging. The change in fortunes comes on analysts at Goldman Sachs reiterating that the natural gas and oil company has the potential to rise by 43.2%.
Improving Bullish Sentiments
Chesapeake sentiments in the market have turned sour on oil prices plunging to three months low on worries of a weaker Chinese stock market. The Chinese government was recently forced to inject funds into the market to control some of the losses.
Wunderlich analyst, Jason Wangler, believes opportunistic buyers will be rewarded in the long run on buying the stock at the current lows. Chesapeake Energy Corporation (NYSE:CHK) has already reached an agreement with FourPoint Energy for the sale of assets owned by its subsidiaries.
The sale of the assets in the Anadarko Basin according to the analyst should reduce the company’s liability. The decision to sell the assets should inject more bullish sentiments on the stock, according to the analyst. Even though a price of $40,000 per flowing Boe is still low to last year’s prices
The sale should boost Chesapeake Energy Corporation (NYSE:CHK) balance sheet without sacrificing any upside potential of the core assets. However, there are concerns that the company may continue to outspend even though it does not have any immediate cash problems. The company currently has $3 billion in cash supplemented by undrawn $4 billion revolver.
Chesapeake Energy Corporation (NYSE:CHK) cash balance should receive a boost with the sale of the assets expected to generate up to $840 million in cash flow. TheStreet currently rates the stock as a Sell with a rating score of D. Weakness on Chesapeake can be seen in multiple areas such as weak operating cash flow as well as a disappointing return on equity. A feeble growth in earnings per share in the recent quarter is also a point of concern.