Chesapeake Energy has filed for Chapter 11 bankruptcy protection after amassing a debt loan of more than $9 billion and oil prices remaining too low for breakeven.
David French and Rama Venkat reported the news for Reuters:
Chesapeake Energy Corp (CHK.N) filed for Chapter 11 on Sunday, becoming the largest U.S. oil and gas producer to seek bankruptcy protection in recent years as it bowed to heavy debts and the impact of the coronavirus outbreak on energy markets.
The filing marks an end of an era for the Oklahoma City-based shale pioneer, and comes after months of negotiations with creditors. Reuters first reported in March the company had retained debt advisers.
CNN’s Matt Egan and Clare Duffy wrote:
Chesapeake was once the nation’s No. 2 natural gas producer, thanks to early bets on fracking. Aubrey McClendon, Chesapeake’s late founder and CEO, was considered one of the leaders of the shale boom that transformed the United States into the world’s largest oil and natural gas producer.
The coronavirus crisis exacerbated those challenges. Despite a recent recovery to $40 a barrel, the price of oil has fallen sharply this year because of excess supply and a sharp drop in demand caused by worldwide stay-at-home orders.
Chesapeake’s share price has dropped more than 93% since January, from $172 to $11.85 as of close on Friday.
Pippa Stevens and Brian Sullivan from CNBC noted:
Franklin Resources and Fidelity are among the biggest creditors, according to people close to the company, and they will be among the primary equity holders following the company’s restructuring. The company will continue operations at a much reduced capacity, with a handful of gas rigs and no oil rigs, according to those familiar with the company’s plans.
“We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths,” CEO Doug Lawler said in a statement.