Shares in Chesapeake Energy Corp. jumped 8% Wednesday as the natural gas producer stepped up to do some damage control, and analysts at Morgan Stanley said they expected the company to "manage" a potential breach of some of the company's debt obligations.
An end in the black would snap a six-day losing streak that has more than halved Chesapeake's stock price
CHK, + 4.64%
and brought it to as low as 64 cents. The shares ended Tuesday at the lowest in 25 years, and still paid homage to a warning of continued operations that also led to the company's bonds becoming record low.
Morgan Stanley analysts downgraded the stock to neutral, and cut their price target to $ 1
"Although we expect the company to succeed through the potential breach of the pact in 2020, it is likely to require strategic measures and / or nonconformities," the analysts said. "With a wide range of results, we downgrade to equal weight," they said.
Last week, Chesapeake reported a larger-than-expected loss in the third quarter and added a "going concern" warning in its quarterly filing to the US Securities and Exchange Commission.
Late Tuesday, following a 17% fall in the share, the company said one of its shareholders, NGP Energy Capital, had distributed 310.8 million Chesapeake shares to the partners of funds it manages prior to Tuesday's opening. CEO Doug Lawler said the company's current capital and operating plans and the goal of cutting spending by 30% next year "will strengthen the company's financial position in the long term."
See also: Chesapeake Energy's share breaks money for the first time in 20 years
Following the announcement, the stock rose 7% in the extended session.
Chesapeake Energy was a pioneer in getting hydraulic fracturing, or fracking, for widespread use in the United States and other parts of the world. However, with ample shale gas came lower prices, and the company has struggled to find its footing.
Shares have lost 65% this year, in contrast to gains of around 23% and 19% for the S&P 500
SPX, + 0.04%
and Dow Jones Industrial Average.
DJIA, + 0.28%