Chesapeake Energy (CHK) - Get Report is a hard sell.

Investing in this natural gas and oil exploration company may look risky for investors, especially since it was staring at bankruptcy a year ago and was chest deep in billions of dollars of debt.

However, this would be only half the story told.

Even critics agree that the company, which was once led by Aubrey McClendon, has made efforts to sidestep a liquidity crisis. After suffering losses in 2014 and 2015, the stock gained 56% in 2016.

But the concerns about the financial condition of the company have resurfaced recently. As a result, the stock has lost 17% of its value so far this year.

The recent drop in share prices has convinced many that Chesapeake is finished. Renewed credit fears, dreary fourth-quarter results, and plummeting gas prices dragged down CHK stock nearly 15% in February. It has underperformed sector peers like Murphy Oil MUR, Cheniere Energy (LNG) - Get Report , and Rice Energy (RICE) .

However, what matters most are facts and not fears.

First, Chesapeake has the required liquidity with its credit facility undrawn and $300 million in cash still on its balance sheet.

Second, the company no longer has near-term maturities. This means debt obligations, at least in the short term, will not impact the company and distract its management.

Third, the company's funding plans for 2017 appear manageable. It has high-class assets that it can put up for sale and get the money required. Of course, deal-making speed and valuations would be key.

Falling gas prices have also rekindled concerns about Chesapeake Energy's financial condition. The company needs higher gas prices to produce sufficient cash flow to bankroll its capital expenditure plan. Summer is approaching and natural gas prices are expected to regain momentum.

Besides, the company has made tremendous progress over the past year. Subsequent to a wave of asset sales, debt settlements, and midstream obligation renegotiations, it appears that Chesapeake is well-positioned to succeed.

Of course, there is work to do and that is why the stock trades at less than $6 compared to $26 in 2010. With analysts projecting double-digit revenue growth this year and the next, Chesapeake is slowly building up form.

If it can fund its 2017 plans with the required asset sales, the company is likely to deliver free cash flow improvements in 2018 as per the management's guidance.

The 28 analysts providing 12-month price forecasts for the company have a median target of $7.75, indicating a nearly 33% upside from current levels. If you can stomach high volatility and noise in the ensuing period, you could be very well rewarded for the risks in owning Chesapeake shares.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.