Wednesday, September 8, 2010

Citigroup (NYSE:C), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), UBS (NYSE:UBS), Barclays (NYSE:BCS) Initiate Coverage on Chesapeake (NYSE:CHKM)

It has been awhile since I've seen this many companies initiate coverage on a company at one time, but Citigroup (NYSE:C), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), UBS (NYSE:UBS) and Barclays (NYSE:BCS) have all started covering Chesapeake Midstream Partners, L.P (NYSE:CHKM).

UBS and Citigroup were the most upbeat on Chesapeake, starting them off at a "Buy." UBS wasn't as positive on its price target for the company, setting it at $25.50, while Citigroup is looking for $28.50.

Goldman Sachs and Bank of America, via Merrill Lynch, placed a "Neutral" rating on Chesapeake. Goldman has a price target of $25 on them.

Barclays rates the company at "Overweight," with a price target of $26.

Every financial institution liked the way the revenue for the company is structured, based on contracted fees over a period of 10 years.

That means there is little risk or downside to changing commodity or natural gas prices, as the fees aren't primarily based on price but on the service offered, which is transporting gas from the well head to the pipeline of the company they're doing business with.

Along with Chesapeake Energy (NYSE:CHK), the other major customer of Chesapeake Midstream is Total (NYSE:TOT).

There is a minimum volume agreement in place over a ten-year period, which will increase on an annual basis through 2018.

Chesapeake Midstream is a venture between Global Infrastructure Partners LP and Chesapeake Energy.

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