NEW YORK ( TheStreet) -- Shares of "profligate spender" Chesapeake Energy ( CHK) are declining by more than 3% in early trading on Tuesday, more than twice the decline of the energy sector, after Argus Research downgraded the stock to a sell.

Argus Research energy analyst Phil Weiss focused in on the long-time schism in the Chesapeake story: quality natural gas assets, but an approach to spending that leaves open questions about Chesapeake's financial vulnerability.

The Argus Research analyst wrote in his Tuesday downgrade, "Although we believe Chesapeake has one of the industry's best collections of natural gas assets, we are lowering our rating from hold to sell due to our continuing concerns about the company's profligate spending and its impact on the balance sheet."

The Argus analyst has been skeptical of Chesapeake's spending strategy for some time previous to the downgrade, commenting to TheStreet previously that each time Chesapeake takes a step to shore up the balance sheet, it seemes to be followed by another levering up of the portfolio.

Argus' Weiss noted in his downgrade of Chesapeake to a sell that the company not too long ago claimed the land grab was over, but went on to spend $3.7 billion acquiring natural gas and oil, both proved and unproved properties, through the year's first nine months. Chesapeake has agreed to spend in excess of $1 billion more on acreage subsequent since June 30.

Most recently, Chesapeake announced an $850 million purchase of Appalachian oil & gas assets from Anschutz Corp. The deal followed shortly after Chesapeake announced a funding agreement with China's CNOOC for its Eagle Ford assets in Texas. Funding agreements of the CNOOC type have been a primary financing method for Chesapeake as it seeks to increase production without having to further leverage the balance sheet.

The Argus Research 2010 EPS forecast for Chesapeake is reduced to $2.78 from $2.95 and its 2011 estimate to $2.55 from $2.75. The specific earnings per share declines are attributed to a weak commodities outlook offsetting production increases from Chesapeake.

-- Written by Eric Rosenbaum from New York.

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