After the markets had time to digest a new pledge to secure debt, Chesapeake Energy Corp. (NYSE: CHK) shares surged, lifting oil exploration and production-related exchange traded funds.
CHK shares soared 32.9% to $5.98 per share Tuesday and was testing its resistance at the 200-day simple moving average after the natural gas producer assured markets that it will do whatever it takes to maintain a borrowing limit of $4 billion.
The surge in CHK shares lifted energy-related ETFs with exposure to Chesapeake. For instance, the Guggenheim S&P Equal Weight Energy ETF (NYSEArca: RYE), which equally weights its component holdings, includes a 2.5% tilt toward CHK and jumped 5.2% on Tuesday, breaking above its 200-day simple moving average. RYE includes a 19.2% tilt toward the energy equipment and services sector.
Additionally, the more focused SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP), which also more or less equally weights components, includes a 1.9% tilt toward CHK and increased 6.5% Tuesday.
Chesapeake pledged “substantially all” of its gas fields, office buildings and derivatives contracts to maintain access to a $4 billion credit line on Monday as other shale oil drillers prepare to cut their credit line, Bloomberg reported.[related_stories]
After the markets digested the energy producers pledge to add additional assets as collateral under its credit agreement, Tudor, Picker and Holt upgraded the stock to “hold” from “sell” Tuesday, reports Fred Imbert for CNBC.
The “+20% move reflects importance of constructive lender update and fading of negative sentiment on the name. Further, the ongoing crude recovery and what we believe will be a significant gas price rebound in 2017 should strengthen tailwinds for the equity,” Tudor said in a note.
The energy-related ETFs were also rallying on improved oil prices Tuesday on reports of a potential Saudi Arabia and Russia production freeze. [Oil, Energy ETFs Break Long-Term Trend on Production Freeze]
Guggenheim S&P Equal Weight Energy ETF