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Chesapeake Energy Extends Gains as Oil Recovers, Poison Pill Adopted

Chesapeake Energy tears higher for a fourth day as oil prices recover from historic losses, and after it adopts a poison pill to thwart any takeover attempts.

Shares of Chesapeake Energy  (CHK)  tore higher again on Friday, adding to gains of more than 90% in the past three days, after the oil and hydrocarbon driller announced it adopted a poison pill to thwart any takeover attempts spurred by its low stock price.

Shares of Chesapeake climbed a whopping 27.38% to $36 in trading on Friday after a rebound in crude-oil prices from unprecedented negative territory continued to help lift the Oklahoma City-based driller’s stock price, which has now more than doubled since closing Monday at a record low of $14.38.

The additional gains came after the company announced on Friday a so-called poison-pill plan, an industry term that describes the harm another company or investor will experience if they attempt to amass a large quantity of a beaten-down stock.

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Chesapeake's shareholder rights plan can be exercised if a person or group acquires 4.9% or more of the company's outstanding common stock, the company said in a statement. Under those conditions, holders of the rights can buy common shares at a 50% discount or Chesapeake can exchange each right for one share.

The purpose of the shareholder rights plan is to protect Chesapeake’s assets known as “net operating loss carryforwards,” which offer special tax exemptions. At the end of last year, Chesapeake had $7.6 billion worth of so-called carryforwards available to offset future federal taxable income, according to the company.

Earlier this month, Chesapeake shareholders approved a reverse stock split of one share for as many as 200 shares. The company is among the more financially precarious of the oil majors, with $192 million of bonds coming due in August out of a total debt load of more than $9 billion, according to Bloomberg.