Yahoo Finance Shale Oil Company Chesapeake Energy Files For Bankruptcy
Chesapeake Energy Corporation (NYSE: CHK) filed for bankruptcy on Sunday to carry out balance sheet restructuring.
What Happened
According to CEO Doug Lawler, by filing for Chapter 11, Chesapeake will eliminate $7 billion in debt and address its legacy financial weaknesses. It would also be able to take advantage of its operational strengths.
Lawler said, “Despite having removed over $20 billion of leverage and financial commitments, we believe this restructuring is necessary for the long-term success and value creation of the business.”
The shale oil company has secured $925 million in debtor-in-possession financing under its revolving credit facility for continuing operations during the Chapter 11 process and another $600 million commitment from its lenders and noteholders upon emerging from bankruptcy.
Why It Matters
Chesapeake’s troubles have been exacerbated by a fall in the prices of oil and gas caused by the pandemic.
Between 2010 and 2012, the company’s debt burgeoned as it attempted to fuel expansion. Chesapeake spent $30 billion more drilling and leasing than it garnered from its operations during this period.
According to CNBC’s sources, Chesapeake will now scaled back concern with only a small portion of its gas rigs and with no oil rigs left operational.
The company’s largest creditors include Franklin Resources, Inc (NYSE: BEN) and Fidelity National Financial Inc (NYSE: FNF).
Chesapeake’s debt equaled that of both Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX) combined when Lawler began his stint in 2013.
The company’s founder Aubrey McClendon was ousted as CEO in 2013 and indicted on federal conspiracy charges in 2016. He died a day after the indictment in a fiery car crash.
Price Action
Chesapeake Energy shares traded 0.34% higher at $11.89 in the after-hours session on Friday. The shares had closed the regular session 7.28% lower at $11.85.
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