Why Chesapeake Energy Corporation's Stock Has Surged More Than 30% in the First Half of 2018

What happened

Shares of Chesapeake Energy Corporation (NYSE: CHK) have been hyper-volatile this year, plunging in February before taking flight in May. Overall, however, the natural gas producer's stock was up 32.3% in 2018 through the end of June thanks to several catalysts, according to data provided by S&P Global Market Intelligence.

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So what

Chesapeake Energy got the year off on the wrong foot after warning investors in early February that its output in 2018 would be flat with last year. That news disappointed investors who wanted to see the company grow. However, a few weeks later the company reported better-than-expected first-quarter results and revised its production forecast to a 1% to 5% growth rate for 2018. That good news caught the market by surprise, causing shares to take off.

Meanwhile, the company announced even more good news in May when it reported first-quarter results that also beat analysts' expectations. One of those positives was that the company planned to ramp up its drilling activities in the Turner formation of the Powder River Basin, which would help drive growth in higher value oil production later in the year. That news helped catapult Chesapeake's stock, sending it on an epic run where shares gained 50% in May and another 12.5% in June as investors not only bought into the good news, but short-sellers covered their positions.

Now what

Chesapeake Energy's stock has been on fire due to fading fears about its growth prospects and financial condition. However, while the company made headway this year, it still has a long way to go before its financial situation is back on solid ground. That's why investors might want to watch this red-hot stock from the sidelines to avoid getting burned if those concerns resurface.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.