Shale-drilling giant Chesapeake Energy filed for bankruptcy to get out from under a mountain of debt as the coronavirus pandemic hammered the energy industry.
The Oklahoma City-based company is the biggest American oil and gas company to seek bankruptcy protection amid the COVID-19 crisis, which has kneecapped demand for fuel and caused oil prices to plummet.
Chesapeake said its Sunday bankruptcy filing will take the company through a “comprehensive balance sheet restructuring” that will get rid of about $7 billion in debt through a deal with the majority of its creditors. The company listed liabilities of more than $10 billion on its bankruptcy petition.
“We are positioning Chesapeake to capitalize on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence,” president and CEO Doug Lawler said in a statement, adding that the company expects to emerge from bankruptcy “as a stronger and more competitive enterprise.”
The bankruptcy followed a lengthy struggle for Chesapeake that was exacerbated by the coronavirus crisis. Founded in 1989 by Aubrey McClendon — the swaggering ex-CEO who died in a 2016 car crash the day after he was indicted for alleged bid-rigging — the company was an early adopter of hydraulic fracturing, or fracking, a controversial method of extracting natural gas from underground rocks.
Chesapeake grew fast but accumulated massive debts along the way that added more than $20 billion in total leverage by the time Lawler took over as chief executive in 2013, according to a bankruptcy court filing.
Lawler cut expenses and sold assets in recent years to keep the company afloat, but it wasn’t enough to stave off bankruptcy amid a historic plunge in oil prices driven by the coronavirus pandemic and a price war between Russia and Saudi Arabia.
Chesapeake noted in a court filing that the benchmark US crude oil price turned negative for the first time ever in April, adding that low energy prices “continue to challenge further economic development” of the company’s assets.
The pandemic could spark a wave of oil and gas bankruptcies — analysts say more than 200 shale companies could file for bankruptcy in the next two years if prices remain where they are, according to the Wall Street Journal.
With Post wires