The Zacks Analyst Blog Highlights: China Petroleum & Chemical, Chesapeake Energy, CNOOC, Devon Energy and JPMorgan Chase

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Jun 22, 2012, 09:30 ET

CHICAGO, June 22, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include China Petroleum & Chemical Corp. (NYSE:SNP), Chesapeake Energy Corporation (NYSE:CHK), CNOOC Ltd. (NYSE:CEO), Devon Energy Corporation (NYSE:DVN) and JPMorgan Chase & Co. (NYSE:JPM).

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Here are highlights from Thursday's Analyst Blog:

Chesapeake Assets Appeal to Sinopec

China's state-owned energy company, China Petroleum & Chemical Corp. or Sinopec (NYSE:SNP) is mulling over acquiring assets worth billions of dollars from the cash-strapped U.S. natural gas producer Chesapeake Energy Corporation (NYSE:CHK).

Per a report from 'Financial Times', Sinopec's top management visited Oklahoma, U.S. to carry out due diligence in connection with the Chesapeake assets. The details regarding the assets, which have raised Sinopec's interest, have not been revealed.

In the backdrop of falling gas prices, the U.S. based gas giant has been on a spree to divest assets valued at about $11.5 billion, as it is struggling to fund its capital budget amid diminishing cash flows.

The assets which have been put up for sale include – the Mississippi Lime in Oklahoma, the Utica Shale in Ohio and the Permian in West Texas and New Mexico. Among these, the 1.5 million acres of Permian assets are considered to be the most reputed area for oil development in the U.S. The analysts have estimated this land alone to bring in over $6 billion through sale.

Earlier in June 2012, Chesapeake had struck an asset sale deal with private equity firm Global Infrastructure Partners related to its pipeline properties for a total consideration of $4 billion in cash. Further, the sale of the Permian acreage will greatly help Chesapeake in reducing its debt burden.

Meanwhile, Sinopec is in pursuit of opportunities to augment its earnings by expanding its upstream segment through mergers and acquisitions. The company is in the process of restructuring to accommodate increased activities worldwide. Sinopec has been slower in entering the U.S. compared to its Chinese rival CNOOC Ltd. (NYSE:CEO). Earlier this year, Sinopec inked a $2.5 billion deal with U.S. oil and natural gas company Devon Energy Corporation (NYSE:DVN).

Both Chesapeake and Sinopec hold a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.

JPMorgan Trims Derivative Positions

JPMorgan Chase & Co. (NYSE:JPM) has offloaded majority of its derivative positions that were the culprit behind its trading loss, CNBC first reported on Wednesday. The derivatives led to about $2 billion marked-to-market loss for JPMorgan in the first six weeks of the current quarter.

JPMorgan has sold approximately 65–70% of its holdings in Series 9 of the CDX North America Investment Grade Index (CDX.NA.IG 9). In May, the company had announced the loss in its Chief Investment Office (CIO) with respect to the synthetic credit portfolio.

The portfolio was meant to protect JPMorgan against potential losses in its large holdings of loans, deposits and bonds. However, the hedging strategy backfired as the repositioning of the credit portfolio was poorly monitored and executed.

As per the data available with London-based Markit Group Ltd., the trading volume in CDX.NA.IG 9 has surged significantly over the last couple of days. On Tuesday, trades worth $31 billion took place in this particular index where normal daily trading contracts are in the range of $1–$5 billion.

Though JPMorgan has not come up with any official statement regarding this, the traders stated that offloading of derivative holdings is most likely coming from the company. Further, the CEO has been concealing the details of the trades in the hope that the company can unwind the position of its derivatives easily.

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