TheStreet's Rhonda Schaffler talks about Chesapeake Energy in the video above.
NEW YORK (TheStreet) -- Shares of Chesapeake Energy (CHK) - Get Report are higher by 6.03% to $4.30 in mid-afternoon trading on Wednesday, one day after the natural gas, oil and NGL producer announced a debt-for-equity-swap to help lower its near-term borrowings.
Wunderlich Securities believes this move makes sense but comes "at the expense of dilution to the common shareholders," Barron's reports. The firm suggests that better opportunities to acquire Chesapeake's stock lie ahead.
The firm reiterated its "hold" rating and $6 price target on Chesapeake Energy.
"It is clear that refinancing the debt would be more expensive, and potentially difficult, so reducing the overall debt is a positive by lowering the upcoming balloon payments in 2017, 2018 and 2019. These reductions in near-term maturities further extend Chesapeake's runway in the downturn," Wunderlich said in a note, according to Barron's.
Additionally, higher oil prices are also giving Chesapeake Energy a boost today. The commodity is trading in the green on expectations that decreasing supply will help eliminate any overhang of unwanted crude, Reuters reports.
Crude oil (WTI) is up by 1.21% to $49.21 per barrel and Brent crude is gaining by 1.69% to $49.43 per barrel this afternoon.
Separately, TheStreet Ratings has set a "sell" rating and a score of E+ on Chesapeake Energy stock. This is based on a variety of negative investment measures, which should drive this stock to significantly underperform the majority of stocks that TheStreet Ratings covers.
The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: CHK