What happened

Shares of Chesapeake Energy (NYSE:CHK) rocketed higher in May, ending the month up 50%. Igniting the rally was the oil and gas company's strong first-quarter results.

So what

Chesapeake Energy started May off with a bang after posting stronger-than-expected first-quarter results at the beginning of the month. For the quarter, Chesapeake reported adjusted net income of $361 million, or $0.34 per share, which came in $0.07 per share ahead of analysts' expectations. That was the company's "best quarterly financial performance in over three years," according to CEO Doug Lawler, thanks to a combination of higher oil and gas prices and Chesapeake's ability to keep a lid on costs.

A natural gas well with pipelines at sunset.

Image source: Getty Images.

The company also continued delivering strong drilling results in the Turner Formation of Wyoming's Powder River Basin. As a result, Chesapeake announced plans to add at least one more drilling rig to the region this year, which will help boost oil production and margins in the coming quarters.

The driller's strong results and optimism about what lies ahead spurred a buying frenzy in Chesapeake's stock last month. Trading volume soared to nearly twice the normal level at one point as Chesapeake went on one of its best runs in more than two years. While some of that volume was likely due to short covering, it seems as though investors are starting to buy into Chesapeake's outlook that it can grow production, cash flow, and shareholder value in the coming years thanks to higher oil prices.

Now what

Chesapeake Energy is benefiting from higher oil prices, which is enabling the company to generate a gusher of cash flow, giving it a little extra to help pay down its mammoth debt load. However, the company still had more than $9.4 billion in debt outstanding at the end of the first quarter, which is significantly more than similar-sized rivals. That debt could start weighing down shares again if oil prices tumble, which is why investors might want to consider one of these top-tier oil stocks instead.

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.