Chesapeake Energy Corp (NYSE:CHK) has filed for Chapter 11, becoming the largest U.S. oil and gas producer to seek bankruptcy protection in recent years.
The bankruptcy filing marks an end of an era for the Oklahoma City-based shale pioneer and comes after months of negotiations with its creditors over the company’s heavy debt load.
Chesapeake Chief Executive Doug Lawler, who inherited a company saddled with about $13 billion in debt in 2013, managed to chip at the debt pile with spending cuts and asset sales, but this year’s historic oil price drop left Chesapeake without the ability to refinance its debt.
Lawler last year spent $4 billion on an ill-timed push to reduce Chesapeake’s reliance on natural gas. The purchase sent its shares lower and this year, so far, the value of Chesapeake’s oil and gas holdings fell by $700 million. The company last month warned it may not be able to continue operations.
Chesapeake plans to eliminate approximately $7 billion of its debt in the bankruptcy restructuring, the company said in a statement. A separate court filing indicated that Chesapeake has more than $10 billion 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 $8 billion. On Friday, its stock traded at $11.85, down 93% since the start of the year, leaving it with a market value of $116 million.
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 $925 million of debtor-in-possession (DIP) financing to help fund operations during the bankruptcy proceedings.
