- Range Resources (RRC -5.2%) and Chesapeake Energy (CHK -4.3%) are sharply lower following downgrades from Bernstein, which thinks gas levered names, particularly those with significant debt loads, likely will struggle as lower natural gas prices compress cash margins.
- Bernstein analyst Bob Brackett cuts RRC to Market Perform from Outperform with a $16 price target at CHK to Underperform from Market Perform with a $2.50 target; it also rates Cabot Oil & Gas (COG -0.9%) and Southwestern Energy (SWN -4.5%) at Market Perform.
- In addition to the outlook for lower nat gas prices, Brackett also cites RRC's "failed" acquisition of its Terryville operations, which has hurt management credibility.
- For CHK, Brackett believes the company needs for gas to be above $3.25/MMBtu or higher oil prices; but he also thinks higher oil prices are bearish for gas, and vice versa, meaning it's "difficult to envision a sustainable macro environment that would allow Chesapeake to thrive."
- ETFs: UNG, UGAZ, DGAZ, BOIL, GASL, FCG, KOLD, UNL, GASX, DCNG, GAZB
- Now read: Natural Gas - One More Cold Blast Before Spring
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