What happened

Shares of Chesapeake Energy Corp. (OTC:CHKA.Q) tumbled last month, falling nearly 19% even though the natural gas company posted better-than-expected fourth-quarter results and production guidance for 2018.

So what

Chesapeake Energy sold off after it unveiled its Q4 production update in early February -- volumes came in below expectations as they fell to their lowest level in two years. That poor report prompted an analyst from Credit Suisse to cut the bank's production forecast for Chesapeake in both 2018 and 2019, while maintaining its underperform rating and $3 price target on the stock.

A natural gas field during winter at sunset.

Investors gave Chesapeake a chilly reception last month. Image source: Getty Images.

That said, Chesapeake Energy would go on to report surprisingly strong Q4 results a few weeks later, pulling in $314 million, or $0.30 per share, of adjusted net income, which beat the consensus estimate by $0.06 per share. The company achieved that in part due to cost cutting, though it also benefited from higher oil and gas prices. Meanwhile, the company said that its production would rise 1% to 5% this year, though it expects to cut capital spending by 12%, which was more optimistic than its prior view that output would be flat year over year. This news sent Chesapeake Energy's stock rocketing.

However, not all analysts thought Chesapeake's results justified a big rally, with Bernstein, for example, saying it could "not rule out a short squeeze" as the catalyst for the surge. Further, it noted that Chesapeake plans to sell another $500 million in assets this year, which will take away earnings, rather than creating value for investors.

Now what

While Chesapeake Energy's Q4 results and 2018 outlook were better than expected, the company still has a long road to recovery ahead of it. The biggest obstacle remains the nearly $10 billion of debt on its balance sheet -- a figure that hasn't budged from the end of 2016. While the company plans to sell some more assets to chip away at its debt pile this year, it's well behind the top natural gas stocks, which all boast stronger balance sheets and enhanced growth prospects.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.