Chesapeake, here is the case of the bull and bear

Many market watchers are debating whether oil's hit a bottom as oil prices landed a big win on Wednesday. But what about energy stocks?

Amid the rally, the Oklahoma City-based company Chesapeake Energy Corporation's stock surged over 10 percent on Wednesday, but experts cannot agree whether the rise implies a long-term rally for this stock or just an ephemeral bounce.

The company's credit rating was downgraded by Standard & Poor's Rating Services to B from BB- with a negative outlook on Tuesday.

The rating service company forecasts that low oil and natural gas prices will hurt Chesapeake's profitability due to the "high cost associated with its gathering and processing agreements."

Low prices in the energy sector may not be the only thing worrying market watchers.

The bond prices should raise a "red flag" for investors, as the company's 2023 bonds are being priced at 27 cents on the dollar, with the leverage out of control. The company has the worst midstream contracts in the business, said Michael Kelly, head of exploration and production at Seaport Global.

"They actually don't have a single play right now that is giving a positive rate of return," he added. "And [after] all that really, the stock is still trading at a premium versus high-quality peers, it makes zero sense to us."

Despite the negative outlooks on Chesapeake, the bulls argue that the downsides are mostly out of the exploration and production company's control, arguing that while investing now does not look economic, if investors look at the strip, the returns are set to increase.

"They've gotten in trouble because of the low gas prices, the high leverage, and the [minimum value commitments] that they have" said Neal Dingmann, managing director of energy at Sun Trust Robinson Humphrey, on Wednesday. He noted that the company has "been able to exchange a third of their debt, they've got over 5 billion liquidity and number three: they have an immense asset base."

But Kelly isn't convinced, "If you're going to rely on asset sales, they're selling off their best stuff, I mean what's left at the end of the day here?" he argued. "you could be looking at a stock that's down another 80 percent by this time next year."