US natural gas giant Chesapeake Energy goes bankrupt

Daniel Fowler
July 1, 2020

A separate court filing indicated that Chesapeake has more than $10 billion in liabilities and assets, respectively.

Chesapeake revealed that it has secured commitments for $925 million in debtor-in-possession financing, which it says will be available upon court approval. Chesapeake remained primarily a gas producer, and it struggled to pay off its debt from McClendon's tenure.

CHESAPEAKE Energy, the archetype for America's extraordinary shale-gas fortunes, filed for bankruptcy, becoming one of the biggest victims of a spectacular collapse in energy demand from the coronavirus-induced global lockdown.

"Chesapeake showed the market - and its competitors - how quickly production could grow, how fast projects could develop, and what the updated United States model for engaging with stakeholders looked like", Beeker said.

Driving the news: Chesapeake said Sunday that it has a restructuring plan with lenders to eliminate roughly $7 billion in debt.

Earlier this month, Denver-based Extraction Oil & Gas filed for bankruptcy protection after building a debt near $1.5 billion.

"Chesapeake acquired liquids-rich assets in the Anadarko basin, Utica, Niobrara, and Eagle Ford but most of this acreage failed to make profitable transition to a sustainable business model in a low oil price environment", Nysveen said in a statement sent to Rigzone.

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

The creation of the late Aubrey McClendon and business partner Tom Ward, Chesapeake helped prove up the revolutionary technology tandem of horizontal drilling and hydraulic fracturing in tight gas plays across Texas, Oklahoma, Louisiana, North Dakota, Ohio, and Pennsylvania. "It was likely going to happen with or without COVID-19", said Alex Beeker, an analyst with the consultancy Wood Mackenzie, in a note Sunday.

For this reason, its bankruptcy could send ripples through the USA oil and gas share market.

By 2012, Chesapeake carried a debt load twice the size of the much larger ExxonMobil which would ultimately lead to the ouster of McClendon in 2013 and the recruitment of Lawler who was previously an exploration executive at Anadarko Petroleum.

About a decade ago, Chesapeake was a US$37.5 billion giant at the forefront of the fracking revolution that transformed the USA oil and gas industry.

But McClendon was forced to resign in 2013 over allegations of conspiring to rig bidding for oil and gas contracts over several years, and amid investor concerns over his heavy spending in what was already a hugely indebted sector. McClendon died the following day in a vehicle accident. Lawler was eligible for $15.4 million in total compensation in 2019, although his payout shrank to $9.7 million because the company's share price dropped.

In the FAQ section, the business noted that its employees will continue to be paid and receive benefits and said it anticipates its shares will continue to be publicly traded through the Chapter 11 process.

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