Ch­e­sa­peake En­ergy, once a nat­u­ral gas leader, is in Chap­ter 11 bank­ruptcy

Com­pany cap­i­tal­ized on frack­ing but strug­gled with debt, fall­ing prices

The Washington Post - - POLITICS & THE NATION - BY WILL ENGLUND will.englund@wash­

Ch­e­sa­peake En­ergy, which more than any other com­pany cap­i­tal­ized on the frack­ing rev­o­lu­tion that turned the United States into a lead­ing shale gas pro­ducer, filed for bank­ruptcy pro­tec­tion Sun­day.

Stag­ger­ing un­der $9 bil­lion in debt and the his­tor­i­cally low price for gas, driven down even fur­ther by the novel coro­n­avirus pan­demic, Ch­e­sa­peake said it will con­tinue to op­er­ate and ex­pects to re­or­ga­nize and emerge from pro­tec­tion un­der Chap­ter 11 of the bank­ruptcy code.

But its fall since the heady days a dozen years ago has been epic. Once val­ued at $37 bil­lion, Ch­e­sa­peake, based in Ok­la­homa City, had been the coun­try’s sec­ond-largest pro­ducer of nat­u­ral gas. Its shares closed Fri­day worth just $115 mil­lion.

Un­der the late Aubrey McClen­don, Ch­e­sa­peake swept up leases from Penn­syl­va­nia to the

Dako­tas, from Louisiana to New Mex­ico. The ex­pan­sion was en­tirely fu­eled by debt, which crip­pled the com­pany when its own suc­cess as a pro­ducer — and the suc­cess of its later ri­vals — drove the price of nat­u­ral gas down nearly 90 per­cent.

Mcclen­don was forced out in 2013; he died three years later, the day after he was in­dicted on a charge of price-fix­ing, when he drove his Chevro­let Ta­hoe into a con­crete abut­ment.

The com­pany, now led by Robert Lawler, has re­duced its debt, but not enough to es­cape bank­ruptcy court. It has been in ne­go­ti­a­tions with its pri­mary cred­i­tors on a re­struc­tur­ing agree­ment, the com­pany said in a statement. Its plan is to elim­i­nate a fur­ther $7 bil­lion of debt.

Lawler has been try­ing to move the com­pany into the oil busi­ness, but the pan­demic has cut deeply into de­mand for oil — and thus the price. Ch­e­sa­peake re­ported losses of $8.3 bil­lion in the first quar­ter of this year.

“The legacy debt and con­trac­tual obli­ga­tions that have hin­dered our per­for­mance,” the com­pany said, fi­nally had to be ad­dressed.

“The Chap­ter 11 pro­cess gives us the op­por­tu­nity to fun­da­men­tally re­set our busi­ness and strengthen our cap­i­tal struc­ture in a sus­tain­able way, so we can cap­i­tal­ize on our sig­nif­i­cant strengths and pros­per re­gard­less of com­mod­ity prices.”

Ch­e­sa­peake had once been a lead­ing driver of Ok­la­homa City’s ur­ban re­nais­sance, but it stepped back from that role after Mcclen­don, who helped found the com­pany in 1989 and who named it after the Mid-at­lantic re­gion that he ad­mired, left as chief ex­ec­u­tive.

Mcclen­don had pro­moted gas as a re­place­ment for coal and a nat­u­ral step to­ward a greener en­ergy cul­ture when tech­nol­ogy would al­low re­new­ables to take over. But the com­pany’s en­thu­si­as­tic re­liance on hy­draulic frac­tur­ing — or frack­ing — has drawn con­sid­er­able crit­i­cism from en­vi­ron­men­tal­ists over the poi­son­ing of wa­ter sources and the gen­er­a­tion of small earth­quakes.

Ch­e­sa­peake’s cred­i­tors in­clude dozens of small oil field ser­vice com­pa­nies, which are al­ready un­der pres­sure be­cause of the global col­lapse in de­mand. An­a­lysts ex­pect that some of those firms could be join­ing the 200 or so na­tion­ally that have de­clared bank­ruptcy or gone out of busi­ness since the pan­demic struck.

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