Wednesday, 15 July, 2020

JPT Chesapeake Energy Files for Bankruptcy Protection

A pumpjack in Wyoming's Powder River Basin. Source Chesapeake Energy A pumpjack in Wyoming's Powder River Basin. Source Chesapeake Energy
Ginger Lawrence | 01 July, 2020, 04:24

Prior to the low-price environment driven the pandemic, Chesapeake was already on many analysts' watchlist for bankruptcy as it faced mounting financial uncertainties. It will proceed with normal operations during the restructuring.

As part of the restructuring agreement, its term loan lenders and secured note holders have pledged to provide it with $600 million beyond that, which the company would obtain by selling them available shares at a discounted rate.

"We are fundamentally resetting Chesapeake's capital structure and business to address our legacy financial weaknesses and capitalise on our substantial operational strengths", chief executive officer Doug Lawler said in a statement.

Chesapeake is, to a certain extent, victim of the success both it and its peers had in extracting huge volumes of gas from previously hard-to-exploit shale basins.

Bankrupt U.S. shale pioneer Chesapeake Energy on Monday laid out its long-term plans and detailed dramatically reduced drilling through the end of the year, with half the rigs as it had to start 2020.

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

The Oklahama-based company announced Sunday that it had voluntarily filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas. Chesapeake Energy lost US$ 8.3 billion in the first quarter of 2020.

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"This filing has been a long time coming", Beeker said. The company has approximately $3.8 billion in secured debt, a $3 billion revolving credit facility, and $2.3 billion in unsecured note obligations, according to various ratings agency reports. The company was founded in 1989 by Aubrey McClendon and Tom Ward with an initial $50,000 investment. "For the US shale sector, there was been no bigger disruptor than Chesapeake", said Robert Clarke, the vice president of US Lower 48 Upstream for global consultancy Wood Mackenzie.

"With the oil and natural gas prices the way they are right now, it would be nearly impossible for them to dig their way out of that situation", Agee said.

At its peak a decade ago, Chesapeake was the second-largest natural gas producer in the country, and it controlled the drilling rights on an area the size of West Virginia.

The heavy debt load it acquired in the process was a burden it ultimately could not shake off.

Mr Lawler took over Chesapeake in 2013 with an aim of reducing its debt load that was larger than Exxon Mobil's, a company 29 times Chesapeake's market value at the time.

Crestwood is engaged in the gathering, processing, treating, compression, storage and transportation of natural gas; storage, transportation, terminalling, and marketing of NGLs; gathering, storage, terminalling and marketing of crude oil; and gathering and disposal of produced water.

In 2016, McClendon died in a one-vehicle auto accident while facing a federal indictment on charges that he colluded on bids for drilling leases-charges that were dropped upon his death. Mr McClendon was ousted in 2013 and died in an auto accident three years later.