Posted on 06/29/2020 8:02:49 AM PDT by Red Badger
June 29 (UPI) -- The Chesapeake Energy Corporation, which made its name drilling shale for natural gas in the United States, announced it has filed for bankruptcy protection.
The Oklahoma-based company said in a statement Sunday that it has filed for Chapter 11 protection in the southern district of Texas to "facilitate a comprehensive balance sheet restructuring."
The process will be used to "strengthen" its balance sheet and to achieve a "more sustainable capital structure" by restructuring its legacy contractual obligations, it said.
The company has been dealing with mounting debt due to low oil and natural gas prices but the environment has worsened even further recently amid the coronavirus pandemic, it said.
In May, the company released its quarterly report for the three months ending March 31 and said it asked advisors to evaluate how to go forward, including the possibility of filing for bankruptcy, warning that "there can be no assurances that the company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions."
In the statement Sunday, Chesapeake Energy said its reorganization plan will eliminate $7 billion in debt.
It also secured $925 million in debtor-in-possession financing from lenders to float operations during the reorganization process and it has the backstop support of $600 million while agreeing with lenders to a $2.5 billion exit financing plan.
"We are fundamentally resetting Chesapeake's capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths," said Doug Lawler, Chesapeake's president and CEO. "By eliminating approximately $7 billion of debt and addressing the legacy contractual obligations that have hindered our performance, we are positioning Chesapeake to capitalize on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence."
Chesapeake Energy was founded in 1989 and became known for its horizontal drilling into shale for natural gas, which vaulted it to become a name in the U.S. gas industry. However, the company incurred much debt over the past decade to fund expansion amid a time of slumping gas prices.
In the May statement, the company said the historically volatile prices of oil and natural gas were worsened by the coronavirus pandemic and the Organization of Petroleum Exporting Countries' decision in March to further reduce prices while increasing production.
"These industry conditions, coupled with those resulting from the COVID-19 pandemic, are expected to lead to significant global economic contraction generally and in our industry in particular," it said.
The bankruptcy follows the publication of a report last week by multinational accounting service Deloitte forecasting a "great compression" in the U.S. shale industry, stating the industry is ripe for consolidation and contraction with many companies likely to go bankrupt.
The house of cards has finally fallen.
THIS is exactly what the oil cartels have been trying to do for awhile now. Once they drive the U.S. domestic producers out of business, they’ll close off their “valve”....again.
On the flip side, we get some low-priced gas & diesel...at least for awhile till they “close their valve” again.
These shale drillers have served the country well, making the USA energy sufficient.
“...These shale drillers have served the country well, making the USA energy sufficient.....”
Yep. That they have without a doubt. I worked in the business almost 5 years in the Eagle Ford in south Texas until I retired in 2014. The bigger & smarter ones saw it coming and prepared accordingly. Smaller ones, like CHK, just can’t take the hit as they work almost “hand to mouth”. The industry will contract, consolidate and/or merge, but I believe it will survive and remain, however, a lot of em are gonna go belly up.
Not trying to be a thread nanny/HOA board member/Nazi hall monitor but there was a thread on this yesterday with some good discussion of the corporate rot at the top of Chesapeake.
http://www.freerepublic.com/focus/f-news/3860095/posts
If anyone wishes to make comments on that thread please don’t and do bring those comments to this thread.
You may now continue with your regularly scheduled programming.
Heard a report on FOX Business this morning that 1 year ago, the stock was selling for $400
Yep. Boom/bust is the status quo of the oil/gas industry.
Plan accordingly.
NY state could become financially destitute with an apocalyptic society of starving people before Cuomo would allow fracking.
Hard to survive huge debt load with declining prices. Been on the bubble for years now.
Ha ha....... I recall a few years back this was one of Cramer’s BOO-Yah BUY BUY BUY stocks!
Chesapeake has had a series of reverse stock splits to keep the price above delisting levels. The 400 price came after several hundred to one reverse splits. Latest was in April, 1; 200.
There will be no peak oil. Cars are going electric faster than most imagine. Oil is not in an elastic market. A small drop in demand will shut down all but the cheapest wells.
Coal is also doomed.
Technology marches on.
There is an electric car and a solar roof in my not to distant future — it is an economic fact. And besides, electric cars are getting nuts in the performance area.
“...I recall a few years back this was one of Cramer’s BOO-Yah BUY BUY BUY stocks!....”
I had 100 shares of it way back before Cramer or anyone else was touting it only because I was personally witnessing their efforts in south Texas. I sold it when I retired in 2014 for only a slight gain.
“...I recall a few years back this was one of Cramer’s BOO-Yah BUY BUY BUY stocks!....”
I had 100 shares of it way back before Cramer or anyone else was touting it only because I was personally witnessing their efforts in south Texas. I sold it when I retired in 2014 for only a slight gain.
Sorry for the double post.
Mods, please delete one if you can.
Thanks.
Seems you may be allowing too much credit to the electric car business. It will take a lot more electric power than we have now to produce enough electricity if all those electical vehicles become reality. That electrical power has to come from somewhere & I don’t think the “renewables” can supply enough of it. AND....if they are to be made more practical for distance driving and/or high current specialty vehicles, then we will need even more electricity than is likely envisioned at this time. I still feel there is a lot of life left in the gas & diesel applications.
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