NEW YORK (AP) -- A plunge in natural gas prices will continue to cut into the value of Chesapeake Energy Corp. shares this year, a Citi analyst said Monday.
Shares of Chesapeake, one of the largest natural gas producers in the U.S., last week fell below $20 for the first time since August 2010. Shares dipped a penny to $19.94 in premarket trading Monday.
Citi analyst Robert Morris downgraded Chesapeake to "Neutral" from "Buy" and lowered his price target to $22 from $28 per share. Morris said natural gas prices will remain weak this year following a production boom that is delivering more natural gas than Americans are consuming. The futures contract on the New York Mercantile Exchange is currently trading near 10-year lows at $1.988 per 1,000 cubic feet.
The drop in natural gas prices will cut into company revenues and lower the value of its assets. It will also make it tougher for Chesapeake to raise cash to fund future development projects, Morris said.
Chesapeake and a few other natural gas producers have started to cut back on production operations in hopes of reducing the nation's glut, but supplies remain nearly 60 percent higher than the five-year average.