Shale pioneer files for bankruptcy
Low gas prices, mountain of debt crushing Chesapeake Energy.
Chesapeake Energy, a pioneer in extracting natural gas from shale rock across the country, filed for bankruptcy protection Sunday, unable to overcome a mountain of debt that became unsustainable after a decade of stubbornly low gas prices.
The company helped convert the United States from a natural gas importer into a major exporter under the swashbuckling leadership of Aubrey McClendon, a company co-founder and former chief executive.
But McClendon overextended the company and amassed more than $20 billion in debt before he was forced out in 2013, and the company, based in Oklahoma City, never fully recovered.
Chesapeake Energy lost $8.3 billion in the first quarter of this year, and had just $82 million in cash at the end of March. With $9.5 billion in debt at the end of last year, it has bond payments of $192 million due in August.
In a statement, Chesapeake said it was filing for Chapter 11 protection to facilitate a complete restructuring. As part of its agreement with lenders, the company said it had secured $925 million in financing under a revolving credit facility, and eliminated roughly $7 billion of debt. It also secured a $600 million future commitment of new equity.
“We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses,” said Doug Lawler, Chesapeake’s president and chief executive. “Chesapeake will be uniquely positioned to emerge from the Chapter 11 process as a stronger and more competitive enterprise.”
Chesapeake has 1,900 employees.
It is the latest heavily indebted oil and gas business to seek bankruptcy protection since the coronavirus pandemic crippled demand for energy.
Under its former chief executive McClendon, the company drilled across Texas, Oklahoma, Ohio, Wyoming and Louisiana.
McClendon was audacious as he aggressively outbid competitors on land leases and explored widely in the early 2000s.
To find a use for all that natural gas, McClendon went on a campaign to promote compressed natural gas vehicles, but the effort went nowhere. He tried to make alliances with environmentalists, arguing that gas could replace coal and be a bridge fuel to a cleaner energy future.
McClendon was charged in 2016 with conspiring to suppress prices for oil and natural gas leases but died in a car accident the day after he was indicted.