Chesapeake Energy Corporation (NYSE:CHK) shares have been downgraded to Underperform by analysts at Sterne Agee, who have also established a price target of $20 per share. In a report issued to investors this morning, the analysts said they based their downgrade on their updated outlook on the price of natural gas.

Chesapeake

They noted that Chesapeake Energy Corporation (NYSE:CHK)’s current spending plan depends on additional sales of assets, and they believe that “selling pressure could eradicate leverage with counterparties.” They point out that after the Mississippi Lime sale, the company as at least a $3 billion funding gap for 2013, so its guidance “could be at risk.”

Sterne Agee analysts point out that Chesapeake Energy Corporation (NYSE:CHK) shares have “sharply outperformed” year to date, coming in at 33 percent, compared to the 16 percent group average. They point out that the company’s stock has been driven by the company’s strong fourth quarter earnings report, the news that controversial chairman Aubrey McClendon is retiring and the strengthening prices of natural gas.

The analysts believe that Chesapeake Energy Corporation (NYSE:CHK) shares are “more than fully valued at the current price.” They say that the company won’t be able to “fully reap” the benefits of the increases in natural gas prices because it has made “questionable hedge decisions in recent months, driven by the need for cash flow certainty.” The analysts believe that the company’s 2013 hedges will greatly impact its cash flow, possibly by as much as $151 million this year.

Sterne Agee analysts called the company’s $1.02 billion in proceeds from its sale of Mississippi Lime just a few weeks ago “disappointing.” They believe it reflects a need for the company to raise cash “with a sense of urgency.”

Shares of Chesapeake Energy Corporation (NYSE:CHK) fell than 2 percent in pre-market trades on Tuesday and then continued falling another 2.5 percent into early Tuesday morning trading.