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Chesapeake soars on credit facility, analysts comments

Shares of Chesapeake Energy built on its previous-day gains Tuesday, closing up 34 percent after analysts warmed to news of its renewed credit agreement.

The stock gained nearly 20 percent Monday after the natural gas producer maintained its borrowing limit at $4 billion, at a time when many oil and gas producers are preparing for large cuts to their credit lines.

Chesapeake said that in connection with the redetermination, it agreed to pledge additional assets as collateral under its credit agreement.

The news led to Tudor, Pickering, Holt upgrading the stock to "hold" from "sell" on Tuesday.

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.

U.S. crude prices have gained over 20 percent in the last two months and were up about 1 percent Tuesday.

Chesapeake debt was also upgraded to "marketweight" from "underweight" at Citi on Monday.

Citi said it had five catalysts that would cause it to re-evaluate its ratings on Chesapeake, and two of them have now been met.

Citi analysts wrote that "the borrowing base is down less than our 20% expectation (it was reaffirmed) and (2) there have been more open market purchases to reduce the maturity wall."

"The credit facility amendment also loosened covenants and put a hold on redeterminations, giving CHK time to ride out a low commodity price environment. Given restrictions in the 2nd lien covenants, we would expect CHK to issue a secured first lien term loan which it could use to take-out the 2017-2018 bonds."

Chesapeake in 2016