Chesapeake Energy Corporation (NYSE:CHK) shares climbed more than 9% to as high as $4.56 on Tuesday following a key upgrade from Simmons & Company, which is part of Piper Jaffray. Analyst Kashy Harrison and team assumed coverage of the energy firm, upgrading it from Underperform to Neutral but leaving the firm’s price target the same at $4.50 per share. Their upgrade comes a little over a month after analysts at RBC downgraded Chesapeake to Underperform.

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Chesapeake Energy’s default risk fades

One of the biggest concerns about Chesapeake Energy has been that the company will default on its debt, but Harrison and team believes the risk of this occurring has diminished. They note that the company completed $950 million worth of divestures and could complete an incremental $500 million more. Further, Chesapeake secured more lenient terms on its credit agreement and a finished a number of debt to equity transactions. The company should also benefit from improving gas prices

The analysts note that Chesapeake Energy still has quite a lot of debt and large maturities coming due in the future, but after completing the above transactions, they believe it can now focus on those upcoming maturities. They also warn that the company’s production profile has been in decline, but all of the actions it has taken to handle these problems drove them to upgrade its stock.

Earnings estimates for Chesapeake Energy

They’re now forecasting losses of 14 cents per share for the second quarter, an increase of 2 cents per share from their previous estimate. They remain below consensus, however, as Wall Street projects 10 cents per share in losses. For the full year, they’re now projecting losses of 38 cents per share, representing an increase of 6 cents per share from their previous estimate. Wall Street sits at losses of 33 cents per share for the full year. Their estimate for 2017 falls 5 cents per share to earnings of 52 cents per share, putting them ahead of consensus at 44 cents per share. The bond and equity transactions drove the adjustments in their per-share estimates.

Chesapeake Energy has issued about 87 million shares to buy back $444 million in par value bonds through private transactions. It now has $1.39 billion in debt maturing next year, $847 million maturing next year and $1.33 billion due the following year. If it can successfully execute the divesture program for net proceeds of between $1 billion and $1.5 billion, of which it has executed $950 million so far, Harrison and team estimate that it will have enough liquidity to cover next year’s maturities. They add that if there are no more divestures on top of the current program, the company’s credit facility due in 2019 should enable it to handle the debt that’s coming due in 2018.