The shares of Chesapeake Energy were negatively impacted today by a rating downgrade from am analyst at Oppenheimer. The stock price of the energy company declined more than 3% to $12.65 per share, around 1:50 PM in New York.

Chesapeake Energy Corporation Falls on Analyst Downgrade

Oppenheimer analyst Fadel Gheit downgraded his rating for the shares of Chesapeake Energy to Perform from Outperform. He explained that the downgrade was due to the negative impact of lower oil and gas prices on the company’s earnings and cash flow.

Gheit expected Chesapeake Energy to incur losses of $544 million or $0.48 per share this year based on the future strip benchmark oil and gas prices. He estimated that the energy company will also record losses of $833 million or $0.84 per share next year.

The analysts also estimated that Chesapeake Energy will achieve an operating cash flow of $2.1 billion this year and $1.5 billion next year. He said, “Assuming CAPEX of $3.7B, annual dividends of ~$230M and a preferred dividend of ~$220M, we expect free cash flow deficits of $2.1B and $2.7B, respectively.”

Chesapeake Energy financial performance

Chesapeake Energy posted adjusted earnings of $0.11 per share during the first quarter of 2015. Its earnings were higher than the $0.04 per share expected by Wall Street analysts. Although the company beat the consensus estimate, its earnings represent an 82% decline year-over-year.

The energy company reported $2.76 billion in revenue, lower than the $3.68 billion expected by analysts. During the same period a year ago, Chesapeake Energy delivered $0.59 in earnings per share on $5.05 billion in revenue.

Concerns regarding the growing natural gas supply affects Chesapeake Energy

Over the past 52 weeks, Chesapeake Energy traded between $12.45 and $31.49 per share. The company lost more than 57% of the stock value over the past year. The decline was primarily caused by the growing concerns regarding the oversupply of natural gas.

The U.S. Energy Information Administration (EIA) reported that the supply of natural gas increased by 111 billion cubic feet for the week ended June 5. The total supply of natural gas in the United States is now around 2,344 trillion cubic feet, up by 753 billion cubic feet from last year and 44 billion cubic feet higher than the five-year average.

Chesapeake Energy is the second-largest producer of natural gas in the United States. Aas of May 6, the company estimated that it could produce around 1,025 to 1,040 billion cubic feet of natural gas for fiscal 2015 ending December 31.

During the first quarter, Chesapeake Energy produced 2.9 billion cubic feet of natural gas, an increase of 12% and 75,800 barrels of natural gas liquids, up by 19%.