OPEC and Easing Credit Concerns Fuel a Big Energy

Stock Rally This Week

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Image Source: Southwestern Energy.

News that the upcoming producers meeting between OPEC and Russia might lead to an agreement to freeze production

fueled a big oil price rally earlier this week with crude breaking through $40 a barrel. That said, the rally did start to fade at the end of the week after more reports surfaced that a deal was no sure thing. That still didn't seem to dampen energy

stocks this week because they also got a big boost from their banks, which are being a bit more lenient than expected. This

proved to be a powerful combination sending dozens of energy stocks up double digits in hopes that the oil market

might be turning a corner.

What:SM Energy (NYSE: SM) rallied more than 15% this week.

So What: Key driver: Oil prices, credit

clarity, and a positive analyst comment

Like most oil stocks, SM Energy benefited from the crude oil rally this week

However, the company’s banks also re-set its borrowing base at $1.25 billion, which was in-line with expectations

Now What: Further, its lenders removed the

financial covenant that set its maximum debt-to-trailing 12 months EBITDAX at 4.0 times, giving it more breathing room during the low point of the energy cycle

Analysts liked the agreement, with Topeka Capital raising its price target on SM Energy from $15 to $32

Key takeaway: With oil heading higher and more breathing room on its credit, SM Energy investors can breathe a bit easier now

What:Southwestern Energy (NYSE: SWN) jumped 16.3% this week.

So What: Key driver: The rally in

crude oil and lenient banks Southwestern Energy’s

rally this week wasn’t due to any news of its own, instead it was swept up by oil prices and easing industry credit concerns

Now What: Banks are proving to be a bit more

lenient than expected during the spring redetermination period, with SM Energy and Chesapeake Energy both benefitting from important amendments to their credit agreements this week

That bodes well for Southwestern Energy, which has seen its own credit deteriorate due to weaker oil prices

Key takeaway: Investors are breathing easier knowing that banks are being lenient this time around

What:Foresight Energy (NYSE: FELP) jumped 19.6% this week.

So What: Key driver: Easing credit

concerns Foresight Energy jumped this

week after disclosing that it has extended the terms of its existing forbearance agreement with bondholders

It was also reported that the company’s founder would inject cash to repay creditors

Now What: This agreement would

enable the coal miner to avoid joining the bulk of its peers in bankruptcy

Key takeaway: With bankruptcy seemingly off the table, investors are rejoicing

What:

Parker Drilling (NYSE: PKD) rallied 21.3% this week.

So What: Key driver: The crude oil rally Parker Drilling rallied sharply

after crude topped $40 a barrel in hopes it will fuel increased drilling activity among its customers

Given that most shale plays need at least that price to break-even, crude’s rally could start putting some drilling rigs back to work

Now What: That’s one reason why analysts

at Nomura recently rated Parker’s stock a buy, seeing a potential bottom being put in crude fueling improved industry conditions for Parker in the future

Key takeaway: With oil moving higher, investors see a light at the end of the tunnel for Parker Drilling

What:Chesapeake Energy (NYSE: CHK) surged over 54.8% this week.

So What: Key driver: Oil prices and an

amended credit agreement Chesapeake Energy got a big

boost this week after oil topped $40 a barrel and its banks amended its credit agreement

Not only did its banks reaffirm its borrowing base at $4 billion, but they postponed the next review until June of 2017 and eased its covenants

Now What: That pretty much took

bankruptcy off the table this year, giving the company ample liquidity and time to sort out its issues

Key takeaway: With bankruptcy off the table, investors poured into Chesapeake’s stock

This could be the next billion-dollar iSecret