Chesapeake Energy (NYSE:CHK) stock closed today down 7.9%.
Chesapeake Energy got caught up in the broader oil-sector rout that hit markets today, cratering oil stocks left and right. Chesapeake also got hit by an analyst downgrade at Australian banker Macquarie, which cut Chesapeake stock from "neutral" to "underperform."
On top of the broader concerns over oil prices, which declined below $43 today, Macquarie warned that Chesapeake is expected to "materially" outspend its cash flows, which is not a good thing to do given the company's already high leverage (i.e., a lot of debt). Macquarie is concerned about Chesapeake's liquidity if it continues to spend money it doesn't have, in an effort to extract oil and gas that's not worth what it used to be worth.
That's good, sound thinking. Unprofitable today, burdened with $9.2 billion in net debt, and burning cash at the rate of nearly $2 billion a year, Chesapeake looks to be in dire straits today. With oil prices in a pronounced and long-term decline, things are not looking good for this energy stock.