For the first time in over 20 years, stocks in Chesapeake Energy Corp. hit the buck on Wednesday, as the "going concern" message of the oil and gas company shocked anxious traders on Wall Street.
Since tumbling 18.0 percent to $1.28 on Tuesday in the aftermath of poor third-quarter results, shares collapsed 29.2 percent to 91 cents.
The 41.7 percent drop over two days is the worst two-day result since the firm was reported in February 1993, breaking the previous record of a 37.4 percent fall over the two days ended February 8, 2016.
That was the first closing under $1 since March 5, 1999, when it closed at 89 cents, representing the 29th straight closing below a dollar. During that stretch, the lowest closure was 71 cents.
Prices for the most actively traded bonds of Chesapeake, the 8 percent notes due in 2025, plummeted Wednesday as well.
According to Market Axess information, the notes changed hands at around 56 cents on the dollar in afternoon trading, as yields grew to over 23 percent.
The yield premium over equivalent treasuries was more than 2,000 basis points (more than 20 percentage points).
In Chesapeake's 10-Q Report Filing late Tuesday with the Securities and Exchange Commission, the firm said oil and natural gas price fluctuations had a "significant" effect on its financial position, cash flows, and volumes of resources and supplies that could be generated.
Analyst Sameer Panjwani downgraded Chesapeake to Sell from Hold and reduced his stock price goal to Zero.
While he does not consider this step to come as a surprise considering the balance sheet concerns, "the ongoing concern alert in the latest 10-Q filing outlined a deteriorating debt relationship that other analysts think may be difficult to overcome," Panjwani wrote to customers in a memo.
CFRA's Paige Marcus has slashed its recommendation from Buy to Sell but trimmed down his price target from $1.50 by a quarter to $1.00.
Chesapeake released a continuing risk alert in its third-quarter 10-Q filing with regards issues on its leverage ratio contract, Marcus wrote in a customer report.
"Because of this note, and with a lending base redetermination planned for the fourth quarter and another in the second quarter next year, we think Chesapeake borrowers are beginning to become less lenient," Marcus emphasized.
Over the last three months, the sector has now fallen almost 35 percent and 75.4 percent over the last 12 months, while the exchange-traded SPDR Power Select Sector portfolio has declined 14.5 percent over the last year and the S&P 500 benchmark has risen nearly 10 percent.
