US shale oil pioneer Chesapeake files for bankruptcy protection

Must Read

Yellowtail could add another 220,000 bpd to Guyana output, 7 floaters on the cards – Hess

Though the Hammerhead area was targeted for the fourth development project in the Stabroek block offshore Guyana,...

Pompeo discusses leveraging Guyana’s wealth of natural resources with President Ali

Shortly after arriving in Guyana on Thursday, U.S. Secretary of State Michael R. Pompeo met with President Irfaan Ali, during...

2020 expected to be a ‘one and done’ recession as oil demand bounces back – API

The enormous challenges triggered by the COVID-19 pandemic this year have caused major disruptions to the global...
OilNOW
OilNow is an online-based Information and Resource Centre which serves to complement the work of all stakeholders in the oil and gas sector in Guyana.

(AlJazeera) Chesapeake Energy Corp has filed for Chapter 11 bankruptcy protection, becoming the largest United States oil and gas producer to do so in recent years as it bowed to heavy debts and the impact of the coronavirus outbreak on energy markets.

The filing on Sunday 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 that the company had retained debt advisers.

Chesapeake was co-founded by Aubrey McClendon, an early and prominent advocate of shale drilling, who died in 2016 in a fiery one-car crash in Oklahoma while facing a federal probe into bid-rigging. Over more than 20 years, McClendon built Chesapeake from a small wildcatter to a top US producer of natural gas. It remains the sixth-largest producer by volume.

Current CEO Doug Lawler, who inherited a company saddled with about $13bn in debt in 2013, managed to chip at the debt pile with spending cuts and asset sales, but this year’s historic oil price rout left Chesapeake without the ability to refinance that debt.

“Despite having removed over $20bn of leverage and financial commitments, we believe this restructuring is necessary for the long-term success and value creation of the business,” Lawler said in a statement announcing the filing.

Lawler last year spent four billion dollars on an ill-timed push to reduce Chesapeake’s reliance on natural gas. The purchase sent its shares lower, and the value of Chesapeake’s oil and gas holdings fell by $700m this quarter. The company last month warned it might not be able to continue operations.

Chesapeake plans to eliminate approximately seven billion dollars of its debt, the statement said. A separate court filing indicated that Chesapeake has more than $10bn in liabilities and assets, respectively.

Chesapeake’s outlook plunged this year as the coronavirus outbreak and a Saudi-Russia price war sharply cut energy prices and drove its first-quarter losses to more than eight billion dollars. On Friday, its stock traded at $11.85, down 93 percent since the start of the year, leaving it with a market value of $116m.

The company has entered into a restructuring support agreement, which has the backing of lenders to its main revolving credit facility – some of which are providing $925m of debtor-in-possession (DIP) financing to help fund operations during the bankruptcy proceedings.

The agreement also has backing from portions of other creditors, including those behind 87 percent of its term loan, and holders of 60 percent and 27 percent, respectively, of its senior secured second lien notes due 2025, and senior unsecured notes.

While the statement does not name Chesapeake’s creditors, investment firm Franklin Resources is among the most significant. On June 15, Reuters reported that Chesapeake’s impending restructuring would turn over control of the company to creditors including Franklin.

Chesapeake also has agreed to the principal terms for $2.5bn in exit financing, while some of its lenders and secured note holders have agreed to backstop a $600m offering of new shares, to take place upon exiting the Chapter 11 process, the statement added.

Chesapeake’s filing in US Bankruptcy Court for the Southern District of Texas makes it the largest bankruptcy of a US oil and gas producer since at least 2015, when law firm Haynes & Boone began publishing data on restructurings.

Chesapeake’s advisers are investment banks Rothschild & Co and Intrepid Partners, law firm Kirkland & Ellis LLP, and turnaround specialists Alvarez & Marsal.

- Advertisement -

Latest News

2020 expected to be a ‘one and done’ recession as oil demand bounces back – API

The enormous challenges triggered by the COVID-19 pandemic this year have caused major disruptions to the global...

Yellowtail could add another 220,000 bpd to Guyana output, 7 floaters on the cards – Hess

Though the Hammerhead area was targeted for the fourth development project in the Stabroek block offshore Guyana, the high quality oil discovered...

Pompeo discusses leveraging Guyana’s wealth of natural resources with President Ali

Shortly after arriving in Guyana on Thursday, U.S. Secretary of State Michael R. Pompeo met with President Irfaan Ali, during which the two leaders discussed...

Department of Energy remains operational, actively involved in Payara negotiations – Vickram Bharrat

Guyana’s Minister of Natural Resources, Vickram Bharrat, told Members of Parliament on Tuesday that the Department of Energy (DE) remains operational and...

Saudi Arabia denounces OPEC+ members trying to cheat oil quota

(Bloomberg) --Saudi Arabia showed its determination to stop OPEC+ members cheating on their production quotas, delivering a thinly veiled dressing-down to its...

More Articles Like This