US fracking pioneer Chesapeake Energy files for bankruptcy
US fracking firm Chesapeake Energy has filed for bankruptcy, saying it had entered restructuring to erase $7 billion in debt as the fossil-fuel industry reels from the impact of the coronavirus pandemic.
The Oklahoma-based oil and gas producer -- once a leader in the US shale boom that has transformed global energy markets -- said the move was necessary despite efforts to improve performance and reduce its dues.
“Our legacy debt and contractual obligations have proven too onerous amidst an unprecedented commodity pricing environment,” it said in a statement Sunday.
The firm had “executed a restructuring support agreement with a majority of the company’s creditors which will eliminate approximately $7 billion of debt and invest $600 million of new equity in the company upon exit”, it added.
Chesapeake said it filed for bankruptcy under Chapter
11 proceedings, which allow a company that is no longer able to repay its debt to restructure without pressure from creditors.
“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,” said Doug Lawler, CEO of the company, which runs fracking operations in states from Texas to Pennsylvania.
The US shale industry was launched by medium-sized and smaller producers using production techniques like fracking as they engineered a drilling boom in several states.
The boom lifted the United States past Saudi Arabia to become the leading oil producer in the world, a distinction won through billions of dollars in loans eased by low interest rates.
But crashing oil prices have dealt a blow to producers, and exploration companies in the United States and Canada now have an estimated $86 billion in debt maturing between 2020 and 2024, including 62 percent rated “junk” or speculative.
Shale production is controversial, because in order to extract oil and gas, a highpressure mixture of water, sand and chemicals is blasted deep underground to release hydrocarbons trapped between layers of rock.
Environmentalists argue that the process -- known as fracking, or hydraulic fracturing technology -- may contaminate ground water and even cause small earthquakes.