Crude oil prices are up 1.25% while natural gas is up almost 2% Tuesday. Those commodities are likely acting as the saving graces for Chesapeake Energy Corporation (CHK) on the day. Otherwise, the harrowing downgrade from the analysts at Jefferies would likely have it in negative territory, rather than rallying 96 basis points in early trading.

But that's exactly what we have on Tuesday morning, Chesapeake stock following oil and gas prices higher. In fact, Chesapeake is even outperforming the broader energy sector, as the Energy Select Sector SPDR ETF (XLE) is only up 0.78%.

So what was this downgrade?

Jefferies analyst Mark Lear went from hold to underperform on Chesapeake, slapping it with a $2 price target. With its $4.19 close on Monday, the $2 target implies more than 50% downside from current levels. Given its 40% fall already in 2017, this would setup for another ugly 12 months of trading.

Lear acknowledged that the company has made "great strides" in its business, such as simplifying its corporate structure and asset base. However, Chesapeake lacks a treasure trove of "high-return drilling inventory," which is needed in this era of lower oil and gas prices.

Without high-return inventory, it's tough for companies to expand margins and boost profitability, while also sacrificing how much wiggle room they have should energy prices fall. Lear also says Chesapeake has a "high fixed-cost burden." As a result, he sees "more value in operators with larger, core positions in higher value plays."

Some names he likes, then? Concho Resources (CXO) , which he assigned a buy rating and $159 price target. The company has a "best-in-class balance sheet" as well as "cash flow neutrality."

Lear also likes Devon Energy (DVN) and Diamondback Energy (FANG) .

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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.

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