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When I last wrote about Chesapeake Energy (NYSE:CHK) last month, the company was cutting exploration in the face of a natural gas glut.

Since then the problem has only worsened, and Chesapeake is aggressively downsizing with $10-12 billion in asset sales, including the sale of its leases in the lucrative Permian Basin of west Texas, and in New Mexico. The company is also pre-selling production in Texas' Granite Wash, and will sell interests in Oklahoma through a stock sale, much as it reduced its interests previously in Ohio's Utica shale.

The problem is that this leverages Chesapeake even-more to natural gas. The interests it's selling are heavy in oil production. That's why they're worth top-dollar. By unloading some of its drilling equipment and pipelines in the area, it's practically eliminating its ability to derive future benefits from Texas oil.

The company's slogan, "America's champion of natural gas," has never been more true. What's left to the company, free and clear, will be a Texas gas play called the Pearsall Shale, a Louisiana gas play called the Bossier Shale, and the well-known Marcellus Shale of West Virginia, Pennsylvania, and New York.

Trouble is, these are all low-profit plays. They're where drilling costs are highest, where environmental risks are highest. Chesapeake is already facing legal action over a blow-out last year in Pennsylvania, raising political risks.

In the near term, investors like the asset sales. They see $10-12 billion in cash and security coming in on a market cap of $15 billion and they are bound to cheer.

But what is left is a much smaller company, leveraged to shale plays that are expensive to produce, politically and legally risky, during a time of continuing glut.

This is similar to what happened last year with First Solar (NASDAQ:FSLR), the solar energy company. Panel prices plunged, profit margins disappeared, the stock was hammered, and investors began questioning whether the company could remain a going concern.

Over the last year Chesapeake has lost almost 28% of its value, which is in line with market cap losses at other companies leveraged to gas, such as Bill Barrett Group (NYSE:BBG). Prices for gas at the Henry Hub are still trending downward, now averaging $2.40 per mcf. Prices are below the sloping downtrend on the NYMEX, indicating they could fall still lower.

Natural gas isn't just found in natural gas plays. It is a byproduct of oil exploration, and oil prices remain very high, over $100/barrel. Thus natural gas production will remain high despite Chesapeake's efforts to shut production in.

Oil prices are high partly because oil is more fungible than gas, easily transported from place to place, so you're close to a world price, give or take $10-20 between Europe and the U.S. Until natural gas can gain the LNG transport capacity necessary for a global price, it will remain in over-supply here, even if some oil producers decide to flare off gas (at the industry's political risk).

So high costs in a market where prices are low and remaining low. Solar players can get their costs down with new technology, increasing yield, improving manufacturing, lowering channel costs.

Chesapeake can't.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.