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Wall Street Piles on Natural Gas Stock Bearishness

Stocks in this article: CHK CRK SWN EQT COG

NEW YORK ( TheStreet) -- The Wall Street view of natural gas stocks hasn't been good, and it got even worse on Friday with pile-on bearish natural gas pricing and stock outlooks from Stifel and Argus Research.

Earlier in the week, as natural gas spot market pricing hit its lowest level in eight months, predictions surfaced calling for a natural gas spot price under $2 in 2012. Pricing may not get that bad, but it is getting worse and that will hit the natural gas stocks hard , cutting into earnings and keeping the sector in the equity market doghouse, according to the latest analyst research.

Natural gas stocks, led by last year's 102% gainer Cabot Oil & Gas (COG), began a slide that has continued throughout the week.

Stifel reduced its natural gas pricing forecast for 2012 to $3.25/$4.00 from $4.50/$5.00.

The Wall Street view of natural gas stocks continues to be a pile-on pessimism outlook in 2012.

Argus Research took a dim view of the outlook for Chesapeake Energy (CHK), specifically, based on the weak natural gas pricing environment. As TheStreet noted earlier this year, Chesapeake sold off all of its natural gas hedges at the end of 2011, and said it believed nat gas pricing had reached a bottom. Chesapeake left itself exposed to the whims of the spot market, and the direction has been straight down in spot market prices since it removed all of its nat gas hedges.

Argus Research analyst Phil Weiss, who has a sell rating on Chesapeake, lowered his earnings outlook for 2012 to $1.81 from $2.50 a share based on natural gas market pricing. While natural gas pricing has continued to fall this year -- it was a dog in 2011 -- the real red flag in the Argus report was a warning that Chesapeake may have to write-off natural gas assets in its fourth-quarter 2011 report.

"Given that natural gas prices fell about 9% year-over-year in 2011, we also think it is possible that CHK will announce impairment charges against some of its natural gas assets when it reports 4Q11 earnings in February," Argus said.

Stifel wrote that the most at-risk natural gas companies -- since 2012 outlooks for gas companies set their budgets on gas prices of $4/mcf or higher -- are the gas- weighted companies with the least hedging. This list includes Comstock Resources (CRK), PetroQuest Energy (PQ), and Chesapeake.

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