Shale pioneer Chesapeake Energy files for bankruptcy

29 Juin, 2020, 15:37 | Auteur: Auguste Feret
  • The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County Texas U.S

The company has entered into a restructuring support agreement, which has the full backing of lenders to its main revolving credit facility - some of which are providing 925 million US dollars of debtor-in-possession (DIP) financing which will help support its operations during the bankruptcy proceedings.

As part of the restructuring agreement, its term loan lenders and secured note holders have pledged to provide it with $600 million beyond that, which the company would obtain by selling them available shares at a discounted rate.

Led by McClendon, Chesapeake was a pioneer in using fracking as a technique, an unconventional drilling method to extract oil and gas from the ground.

Other wildcatters followed in Chesapeake's path, racking up huge debts to find oil and gas in fields spanning New Mexico, Texas, the Dakotas and Pennsylvania.

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.

Why it matters: Oklahoma City-based Chesapeake is the highest-profile company to file for bankruptcy during the COVID-19 pandemic, which has sapped prices and demand. It has focused on drilling in underdeveloped areas of Oklahoma and Texas, largely abandoning traditional vertical well drilling, employing instead lateral drilling techniques to free natural gas from unconventional shale formations.

It became a colossus in the energy markets, eventually reaching a market valuation of more than $37bn.

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The company was valued at around $115m at the close of trading on Friday.

Chesapeake grew with lightning speed under one-time CEO Aubrey McClendon, known for his aggressiveness acquiring oil and gas drilling rights. McClendon pushed the company to acquire enormous tracks of land in several states, taking on mounting debt along the way. He then founded a new company, American Energy Partners. But frackers like Chesapeake flooded the market with cheap natural gas, sending prices to well under $2.

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. McClendon died in a vehicle crash in 2016 hours after charges were lodged by the United States justice department over the alleged market malpractice. But that debt grew more threatening within two years as the fracking boom turn to a bust in 2015. Chesapeake reported a quarterly loss of $4bn that year and the first wave of layoffs began with 750 jobs.

Despite Chespeake's problems, Lawler past year remained the highest-paid CEO in Oklahoma with $15.4 million in compensation, according to a ranking compiled by The Associated Press and Equilar.

Chesapeake lost $8.3bn in the first quarter of this year, and it listed $8.62bn in net debt.

Over more than two decades, McClendon built Chesapeake into one of the world's biggest natural gas producers, and in the process, he helped turn the U.S. into a major exporter of fossil fuels after years of dependence on overseas suppliers. The company last month warned it might not be able to continue operations.

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