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Pro Analysis

Stay away from Chesapeake Energy: RBC

A worker on a Chesapeake Energy natural gas rig in Fort Worth, Texas
Matt Nager | Bloomberg | Getty Images
A worker on a Chesapeake Energy natural gas rig in Fort Worth, Texas

Investors should avoid Chesapeake Energy due to continued financial balance sheet issues, according to RBC Capital Markets, which downgraded the shares of the oil and natural gas firm to underperform from sector perform.

"Leverage concerns loom; we think there is time and options but it's not a layup," RBC Capital Markets' Scott Hanold wrote in a note to clients Thursday.

"(The company) could be in asset harvest mode for some time. ... We think it's unlikely that CHK will generate much free cash flow through 2020. Accordingly, we anticipate that management will continue to aggressively pursue transactions similar to what has occurred over the last few months."