Is Chesapeake The 'Shining Gem' In Today's Oil Slick?

According to Credit Suisse analysts Edward Westlake and Zachary Deschaine, Chesapeake Energy Corporation (NYSE: CHK) is set to outperform the broader market. Amid several other downgrades, the firm upgraded the stock from Neutral to Outperform and raised its price target from $21 to $24 on Friday.

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Susquehanna initiated coverage with a Neutral and a $22 price target, implying a potential upside of more than 10 percent.

On the flip side, Credit Suisse downgraded six other oil stocks:

Outperform To Neutral

• Chevron Corporation (NYSE: CVX)
• Hess Corp (NYSE: HES)
• Magnum Hunter Resources Corp (NYSE: MHR)
• Noble Energy, Inc. (NYSE: NBL)

Neutral To Underperform

• Murphy Oil Corporation (NYSE: MUR)
• Exxon Mobil Corporation (NYSE: XOM)

What Separates Chesapeake From Peers?

Credit Suisse stated the upgrade was made “to reflect an attractive relative valuation, a much improved balance sheet that has investment grade qualities, and our [Credit Suisse’s] expectation that the company could utilize its newly found financial strength to make a counter-cyclical M&A transaction to high-grade its asset base.”

Although there are some headwinds to this call, including the oversupply in natural gas and liquids markets, analysts still view “the current valuation as defensive with the shares trading toward the lower end of the 2015 and 2016 EV/EBITDA valuation.”

Furthermore, despite the reduction in the firm’s commodity price forecast, the increase in its NAV “reflects the accretive nature of the Southern Marcellus asset sale to SWN,” which was “the key transformative deal for CHK.”

According to Credit Suisse’s high yield research team, this transaction has the potential to “meaningfully enhance the company’s credit,” and leaves Chesapeake’s balance sheet standing as one of the strongest in the peer group.