Chesapeake Energy Corp filed for Chapter 11 on Sunday, becoming the largest US oil and gas producer to seek bankruptcy protection in recent years as it bowed to heavy debts and the impact of the coronavirus outbreak on energy markets.
Driving the news: Chesapeake said Sunday that it has a restructuring plan with lenders to eliminate roughly $7 billion in debt. In addition, certain lenders under the company's revolving credit facility have also agreed to the principal terms of a $2.5 billion exit financing, consisting of a new $1.75 billion revolving credit facility and a new $750 million term loan.
Under the leadership of the late Aubrey McClendon, Chesapeake swept up leases from Pennsylvania to the Dakotas, from Louisiana to New Mexico.
But those companies are now under pressure to service those debts.
Chesapeake Energy, a major oil and gas producer and a USA shale pioneer hard-hit by the recent drop in oil prices, has filed for bankruptcy, the company announced in a statement. It largely abandoned traditional vertical well drilling, employing instead lateral drilling techniques to free natural gas from unconventional shale formations. Then, the first in a series of financial shocks hit Chesapeake as the fallout from the global financial crisis of 2008 sent energy prices into the basement.
Chesapeake Energy Corporation's headquarters in Oklahoma City. Its shares closed Friday worth just $115 million.
With the colourful McClendon as chief executive, Chesapeake grew with lightning speed and was known for its aggressiveness in acquiring oil and gas drilling rights. Chesapeake in some ways became a victim of its own success as other companies followed its lead and United States energy production soared, driving down prices.
As Chesapeake was expanding at breakneck speed, natural gas prices were near $20 per million British thermal units, the benchmark for natural gas trading.
McClendon left the company in 2013 amid controversy around its business practices. McClendon died the following day, the single occupant in his Chevrolet Tahoe that smashed into a concrete viaduct at almost 90 miles per hour.
Robert Lawler became CEO after McClendon's death and began selling off assets to get Chesapeake's debt under control. But that debt grew more threatening within two years as the fracking boom turn to a bust in 2015. The agreement cost Chesapeake $3 million the first season and was set to increase by 3% each year following.
Despite Chespeake's problems, Lawler a year ago remained the highest-paid CEO in Oklahoma with $15.4 million in compensation, according to a ranking compiled by The Associated Press and Equilar.
Chesapeake lost an eye-popping $8.3 billion in the first quarter of this year, and it listed $8.62 billion in net debt. The company said in a regulatory filing in May that management has concluded that there is substantial doubt about the companys ability to continue as a going concern.