What happened

Shares of Chesapeake Energy (NYSE:CHK) rallied more than 10% by 2:30 p.m. EST on Wednesday. Driving the rebound in the energy stock was the result of its notes-exchange offer.

So what

Chesapeake Energy has been working on all angles to improve its balance sheet. Earlier this month, for example, the company secured a $1.5 billion term loan, which it used to refinance the credit facility related to a recent acquisition. With a 4 1/2 year term, the loan bought it time since the credit facility would have matured next year.

The word debt written on a chalkboard with an eraser next to it.

Image source: Getty Images.

The company also offered to exchange some of its existing debt for up to $1.5 billion of second-lien notes due in 2025 that had an 11.5% interest rate. The company's creditors loved the idea of swapping out their unsecured bonds for these more secure notes.

Chesapeake reported today that holders of $3.22 billion of the company's notes -- 71% of those available for the exchange -- tendered their bonds. Because of that, Chesapeake increased its exchange cap from $1.5 billion to $2.21 billion. This move will enable the company to shave roughly $1 billion in debt off its total since the agreed exchange rates are at a 30% to 38% discount to the face value of these bonds.

Now what

Chesapeake's recent exchange offer will reduce its total debt level by more than 10%. However, the company will still have nearly $9 billion in debt outstanding, which is a massive weight. Because of that, it has a long way to go, which is why investors should steer clear of this stock since it remains one of the riskiest bets in the oil patch.