Chesapeake Energy Corp. on Friday said it has suspended dividends on its preferred shares as the natural-gas producer moves to conserve cash and pay down its debt.
Shares of Chesapeake, down 82% in the past year, added 5.4% to $3.74 a share in premarket trading.
Chesapeake said the move will save the company $170 million a year, which it can use pay down debt while its debt securities are trading at significant discounts.
"Given the current commodity price environment for oil, natural gas and natural gas liquids, we believe that redirecting this cash toward debt retirement provides better returns for the company," said Chief Executive Doug Lawler.
Chesapeake said the dividend suspension doesn't constitute a default under its revolving credit facility or bond indentures.
A former Wall Street darling once headed by famed wildcatter Aubrey McClendon, Chesapeake sold billions of dollars in debt to help finance oil and gas purchases in recent years. But the tumble in natural-gas prices has hurt the company, which has posted a string of quarterly losses.
Chesapeake has been working to reduce its $11.6 billion debt load. In December, The Wall Street Journal reported that the company was working with restructuring advisers at Evercore Partners Inc. to shore up its balance sheet.
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