Chesapeake Energy slapped with a rare 'strong sell' rating, $0 price target from Wall Street firm (CHK)

Reuters / Brendan McDermid

  • Chesapeake Energy was issued a rare "strong sell" rating and slapped with a $0 price target in an analyst note from CFRA Research on Tuesday.
  • Analyst Paige Meyer said the company has a negative tangible net worth and viewed a bankruptcy filing in 2020 as likely.
  • Chesapeake Energy has seen its market value fall more than 99% from $10.1 billion in 2015 to $125 million today as energy prices collapsed, according to data from YCharts.
  • Visit Business Insider's homepage for more stories.

Chesapeake Energy was downgraded from "sell" to "strong sell" and slapped with a $0 price target in a Tuesday morning analyst note issued by CFRA Research's Paige Meyer.

The note comes following a collapse in energy prices that saw oil prices briefly turn negative in April. 

Meyer said that the Oklahoma City-based energy company will likely file for bankruptcy in 2020, as it has a negative tangible net worth due to its recent $8.4 billion impairment on a slew of different energy assets.

Chesapeake Energy has seen its market value fall more than 99% from $10.1 billion in 2015 to $125 million today, according to data from YCharts. 

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One thing that didn't decrease along with its market cap is its debt load, which now stands at $9.5 billion as of March 31.

Meyer says Chesapeake Energy is likely to breach its financial covenants, which should significantly reduce Chesapeake's potential borrowing base and result in a default on its credit facility.

That would be the first domino to fall, which would likely lead to a number of other lenders calling their debt due because of "cross default" clauses, according to the note.

Chesapeake Energy recently canceled its first quarter earnings call to discuss its quarterly results.

Shares of Chesapeake Energy are down 21% to $10.14 in Tuesday afternoon trading, and are down 94% year-to-date.

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