RBC Capital provided their views on Chesapeake Energy (NASDAQ:CHK) following recently announced Q1 results, with EPS of $4.22 beating the Street estimate of $2.93. The company also announced the sale of a portion of its Eagleford assets.
The analysts believe the company is in a strong position to return free cash flow to shareholders, bolstered by recently announced acquisitions. At strip commodity prices, the fixed plus variable dividends support a 4-5% yield, and the $2.5 billion of sale proceeds likely are used for opportunistic buybacks (once the transactions close).
The analysts think acquisitions are not a high priority at this time given the company’s high bar for accretion across several operational and financial metrics. Management has slowed activity given a softer natural gas environment, but the analysts think there is an optionality to add some activity in late 2023 with a supportive macro.