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Chesapeake: No plans to pursue bankruptcy

Krysia Lenzo
Chesapeake: No plans to pursue bankruptcy

Chesapeake Energy (CHK), the second-largest natural gas producer in the United States, plunged as much as 50 percent on Monday after multiple reports that it had hired restructuring attorneys.

Chesapeake shares were down $1.01 at $2.05, having been halted at least eight times in morning trading. Despite these reports, the energy company said in a statement that it has no plans to pursue bankruptcy, and Chesapeake is aggressively seeking to maximize value for all shareholders.

Chesapeake, which has more than $10 billion in debt, has been hit by a steep fall in both oil and gas prices. Reuters reported that the company's bonds maturing next month plunged 20 points, to a level of 75 cents on the dollar, on the news.

Shares in Williams Cos (WMB) fell as much as 34 percent, while Energy Transfer Equity (ETE) fell 26 percent. ETE is in the process of acquiring Williams, which counts Chesapeake as a major partner.

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In an interview with CNBC, John Arnold, the legendary energy trader formerly of the hedge fund Centaurus Advisors, was less optimistic about Chesapeake's current situation.

Arnold noted that the company's "legacy costs are overwhelming" and "they have too much debt."

In terms of the energy market more broadly, Arnold added that "E&P companies have seen tremendous strain on their businesses."

"Margins were not bad in 2015, but companies had a high percentage of oil price hedged. They're not as highly hedged in 2016 and saw a steep change in revenue on January 1st," said Arnold.

According to the Natural Gas Supply Association, Chesapeake trailed only ExxonMobil (XOM) among natural gas producers in the first half of 2015, at a volume of 2,979 MMcf per day.

Chesapeake has 14 bonds due between Jan. 2017 and Dec. 2038. Nearly all of those bonds are trading between $0.50 and $0.24, and the yield on their note due Aug. 2017 jumped from 73 percent to 99 percent on Monday.

— Reuters and CNBC's Scott Wapner, John Schoen and Christopher Hayes contributed to this report.



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