Shares of Chesapeake Energy Corp. sank 5.4% toward an 11-month low in midday trade Wednesday, after Macquarie Research turned bearish on the oil and gas explorer, citing concerns that the company is ill-equipped to deal with another drop in oil prices. Analyst Paul Grigel downgraded the stock to a rare underperform rating from neutral and slashed his stock price target to $3.50, which is 25% below current levels, from $6.00. Only 5.8% of the U.S. companies covered by Macquarie are rated underperform. Grigel said the lower outlook for crude prices pressures Chesapeake's fundamentals given the company's recent efforts to increase its oil exposure over natural gas. "While the company has made strides in repositioning itself, it simply isn't far enough along to sustainably compete in a lower-for-longer crude world," Grigel wrote in a research note. Continuous crude oil futures tumbled 1.6% toward a 10 1/2-month low, and have now plunged more than 21% from the February peak. And although the company has been selling assets to pay down its high debt load, Grigel said he is still estimates a "material outspend on high leverage with concerns around liquidity." The stock has plummeted 34% year to date, while the SPDR Energy Select Sector ETF has shed 15% and the S&P 500 has gained 8.8%.
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