Chesapeake Energy Corporation (NYSE:CHK) is one of those market beasts that could go either of three ways: It could turn out to be a deep value play that returns multiples over many years, it could go under or it could muddle along for many years. My instincts tell me that CHK stock is likely to fall into the third category.

So while that doesn’t make Chesapeake a long-term investment, it does make it a possible trading vehicle, and that does provide profit potential.

Chesapeake Energy: The Fundamentals

If you look at the bankruptcy path, it actually is not nearly as apparent as it was a couple of years ago when oil prices crashed.

The threat of bankruptcy is always connected to debt. Certain companies can carry tons of debt for decades, constantly refinancing it or extending maturities, because the cash flow supports it. The banks are happy to have the money out and get paid on it. They know that, say, AT&T Inc. (NYSE:T) isn’t going to have a problem paying off $100 billion in debt. Some day.

CHK stock doesn’t have too much of a problem here. Chesapeake paid about $95 million in debt service last quarter on revenues of $2.75 billion. It even lowered overall debt from about $10 billion to $9.5 billion.

According to the latest presentation, CHK also does not have any substantial debt payments this year or next. In 2019, there’s $380 million worth of debt maturity, and $854 million in 2020.

So I don’t see bankruptcy as being the path of least resistance here.

However, I don’t see CHK stock headed into growth territory, either. There may or may not be a turnaround in play right now. The good news was that Chesapeake beat significantly on its top line — $2.75 billion came in a full $430 million ahead of estimates, and that was up 41% year-over-year.

Guidance was raised, which is another good sign. Adjusted production growth was revised up from a range of -3% to +2% to 0% to 4%. More high-margin wells are supposed to be turned-in-line the rest of this year than in Q1.

The other good news is that CHK is not just a shale producer. It produces other energy, including natural gas. CHK said they are profitable above $3.00/mcf, and the predictions are for prices to hit $32.7/mcf this year and $3.54./mcf next year.

However, along with these higher production numbers, comes higher capex. Energy production is very capital intensive. Will capex offset or exceed additional revenues and cash flow? It’s not clear yet, but CHK did narrow its capex range from $1.9 billion to $2.5 billion to $2.1 billion to $2.5 billion.

CHK Stock as a Trade

The problem is that oil prices need to really be stable above $60 to even contemplate long-term growth.

In the meantime, it’s more about operating its acreage in the most efficient manners possible. Shale itself just doesn’t feel like it is going to truly become a growth play. If you feel it might, the best thing to do there is probably to diversify and buy an ETF like Market Vectors Unconventional Oil & Gas ETF (NYSEACRA:FRAK).

As for CHK stock, one has to look at it as a trading vehicle.

I’m not much for technical analysis, but it’s a useful tool for trading. A glance at a two-year chart shows that after CHK stock recovered from its early 2016 crash, it has settled into a year-long range between $5 and $8 per share. With today’s price at $5.70, we’re nearing the lower end of that range.

I think opening up a long position with the goal to scale out over $7 is a good plan. Set a stop-loss at $4.90.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. As of this writing, he had no positions in any stock mentioned. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. He also is the Manager of the forthcoming Liberty Portfolio. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.