Chesapeake's Black Monday: Bankruptcy Or No Bankruptcy?

It was a Black Monday of sorts for oil and natural gas company Chesapeake Energy Corporation CHK, down 34 percent after reports surfaced that the company is working with restructuring attorneys Kirkland & Ellis.

The drop off indicates the market saw a relationship with the firm as a potential negative and -- in some traders' eyes -- it might indicate one step closer to a bankruptcy, despite Chesapeake's mid-day press release asserting it has worked with Kirkland & Ellis since 2010.

John Arnold View And High-Yield Flight

CNBC's Scott Wapner Tweeted John Arnold told him that bankruptcy or restructuring were the "most likely" outcomes for the company.

Related Link: Chesapeake Energy's Stock Might Be Worth Zero; The 'Worst Isn't Over' For MLPs

Also weighing on shares was a Bloomberg report that high-yield bond investors were fleeing from Chesapeake's March 2016 debt.

Sterne Agee CRT: Chesapeake Can Survive If Natural Gas Rebounds

Amid the selloff, Sterne Agee CRT's Tim Rezvan told CNBC if traders believe natural gas will remain below $3, Chesapeake "will have a very hard time surviving out two to three years." A $3.00 or $3.50 natural gas price makes a "very different story" for investors.

Rezvan said that despite the potential for more asset sales, Chesapeake's debt overshadows this. "It's a very hard time to be a seller, especially when you're a wounded seller like Chesapeake right now."

The analyst said he wouldn't "step out" as far as to say bankruptcy is the most likely outcome. If natural gas prices rebound near the $3 range, Rezvan thinks Chesapeake can survive.

Chesapeake closed Monday at $2.04; shares traded above $20 one year ago.