Chesapeake Energy falls on downgrade

Chesapeake Energy shares fall after analyst downgrades, citing difficulty of further gains

Associated Press

NEW YORK (AP) -- Shares of Chesapeake Energy Corp. fell on Wednesday after an analyst downgraded the company, saying its shares will have a tough time moving any higher.

THE SPARK: Stifel Nicolaus analyst Amir Arif downgraded the shares to "Hold" from "Buy." Arif's reasons included Chesapeake's value compared to comparable companies, worries that the assets it still plans to sell will not boost shares much, and an expectation that investors will focus on its profits instead of what it can get from selling assets.

Chesapeake Energy Corp. is one of the nation's largest natural gas producers. It has been reeling from a combination of historically low natural gas prices and corporate governance controversies that resulted in founder and CEO Aubrey McClendon being stripped of his chairmanship.

THE ANALYSIS: Chesapeake has been selling assets to pay down debt. Earlier this month it said it expects have sold $13 billion to $14 billion worth of assets, including large swaths of drilling land. It expects to sell as much as $5 billion in assets next year.

The company lost more than half of its market value between February 2011 and May 15, 2012. But Chesapeake shares have risen almost 21 percent since May 25, when activist investor Carl Icahn disclosed that he had bought a stake in the company. Its shares have risen more than other energy companies, Arif wrote. The runup, plus the smaller and less-desirable assets that remain to be sold, mean that further gains may be harder to come by.

SHARE ACTION: Down 26 cents, or 1.4 percent, to $18.83 in midday trading. Their high in the past year was $29.87 set in October.

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