This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Even an Analyst Long on Chesapeake Energy Can't Say 'Buy'

NEW YORK ( TheStreet) - The analyst disclosure section of Citigroup energy analyst Robert Morris's new downgrade on Chesapeake Energy (CHK - Get Report) may be the most telling part of the report.

Morris is long shares of Chesapeake Energy, but in moving to neutral from buy on Monday (and we all know on Wall Street that a neutral rating is just a sell rating by another name), the Citigroup analyst is not willing to tell any other investor to buy Chesapeake Energy shares here, even as the shares sit at a four-year low in tune with the historical slide in the price of natural gas.

The outlook for natural gas has not necessarily improved just because it hit the psychological threshold of $2. The fundamentals in the natural gas production market suggest the price pressure could get worse before it improves.

It's one of the reasons why Chesapeake Energy shares aren't trading like they did in days past. Historically, an announcement from Chesapeake Energy about monetizing assets typically led to a rally in the stock. But, last week, when the company announced $2.6 billion in asset deals, the stock fizzled.

The breaching of the $2 natural gas barrier was a big part of the market yawn in reaction to the Chesapeake deal.

Citigroup's downgrade reinforces the idea that as Chesapeake looks to monetize as much as $10 billion to $12 billion in assets, the company is merely doing what it takes to avoid more pessimism from the sell side. Its ability to sell more from its asset collection shouldn't excite investors.

"We give the highest marks to Chesapeake management for its success in creatively monetizing assets and we are not doubting its ability to continue to do so," Morris wrote. "However, the remaining funding gap this year stands at ~$5.8bn and for 2013 at $4.4bn but this could grow to $5.7bn if natural gas prices were to average $2.50/MMBtu next year. But the risk to filling such a large funding gap in a downside scenario over the next two years is growing and by far greater for CHK than for any other company in our coverage group."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CHK $5.65 0.00%
AAPL $94.19 0.00%
FB $118.06 0.00%
GOOG $695.70 0.00%
TSLA $222.56 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs