The Country Caller takes a look at the reasons for Chesapeake’s surge yesterday
Chesapeake Energy Corporation (NYSE:CHK) stock surged on Tuesday followed by an upgrade by Piper Jaffray. The upgrade by the sell side firm aroused a wave of optimism among the stock’s investors allowing it to rise sharply. Chesapeake closed yesterday’s trading by rising 9.57% up at $4.58. The gains were also extended to today’s pre-market trading as the stock rose by a further 0.66% at $4.61.
Piper Jaffray upgraded the stock to Neutral from Underweight with a 12-month price estimate of $4.50. Chesapeake recently has engaged in a number of debts to equity swaps. The company has swapped 87 million shares to exchange around $444 million in debt.
Debt and liquidity have been the hot topics when it comes to energy companies. Some of the most indebted companies in today’s environment would most likely belong to the energy industry. Companies such as Chesapeake are looking for new and innovative ways to bring down the debt levels and stir investor confidence.
The sell side firm was also optimistic over the company’s recent asset sales. Chesapeake has completed $950 million in asset divestitures. Both lower debt and asset divestitures have reduced the cash burden on the company.
Since the past two years, oil prices have fallen significantly. During pre-market trading on Wednesday, the US benchmark for crude oil, West Texas Intermediate (WTI), was down 1.35% at $46.17 per barrel, while the global benchmark for crude oil, Brent Crude, was down 1.67% at $47.66 per barrel.
While crude oil prices remain on a downward route, the outlook for natural gas is improving. Increasing pressure from environmentalists has made a unique change in the US’s energy mix. Coal, which was previously the front-runner of the country’s electricity generation, is losing its share to natural gas fast. The Energy Information Administration (EIA) predicts that it isn’t long before gas outpaces coal as the leading electricity generator in the country.