Home Latest News Chesapeake Energy, a pioneer in the U.S. shale revolution, files for bankruptcy...

Chesapeake Energy, a pioneer in the U.S. shale revolution, files for bankruptcy protection – CNBC


A employee on a Chesapeake Strength all-natural gas rig in Fort Worthy of, Texas

Matt Nager | Bloomberg | Getty Photographs

Chesapeake Electricity, the poster youngster of the U.S. shale revolution, submitted for individual bankruptcy defense on Sunday. The transfer arrives as the business and industry far more broadly has been rocked by a drop in oil and fuel rates amid the coronavirus pandemic.

The seriously indebted company has been in difficulties for some time, and in May perhaps said that it had considerations regarding its very long-term viability.

Chesapeake claimed that $7 billion in credit card debt will be wiped out via the restructuring. The enterprise has secured $925 million in debtor-in-possession financing in buy to proceed operations through the individual bankruptcy process. In addition, Chesapeake has secured an arrangement in theory from certain present loan companies for $two.5 billion in financial debt funding on emergence from personal bankruptcy, as properly as a backstop motivation for $600 million in new fairness.

Franklin Means and Fidelity are among the the most important lenders, according to individuals near to the enterprise, and they will be amid the primary equity holders subsequent the firm’s restructuring. The company will proceed functions at a significantly diminished potential, with a handful of fuel rigs and no oil rigs, according to individuals acquainted with the firm’s options.

“We are basically resetting Chesapeake’s funds structure and enterprise to handle our legacy monetary weaknesses and capitalize on our sizeable operational strengths,” CEO Doug Lawler claimed in a statement. 

Chesapeake Strength was launched in 1989 by Aubrey McClendon. An early pioneer of horizontal drilling, he crafted the company into a key player in the U.S. gasoline market. At its peak, Chesapeake had a hundred seventy five working rigs, with functions across the U.S. such as in Texas, Louisiana, Pennsylvania and Ohio.

But the firm took on a lot of credit card debt to gasoline its quick expansion, and from 2010 to 2012 put in $30 billion extra in drilling and leasing than it designed from its operations.

McClendon was ultimately ousted from the enterprise in 2013, and in 2016 was indicted on federal charges of conspiring to rig bids for oil and purely natural fuel leases for a new undertaking he experienced started out. The adhering to day, McClendon perished in a auto crash.

When existing CEO Doug Lawler succeeded him, the corporation experienced nearly as a great deal credit card debt as Exxon and Chevron mixed.

“Around the previous numerous many years, our focused workforce have transformed Chesapeake’s enterprise — improving upon money efficiency and operational performance, eliminating expenditures, lowering debt and diversifying our portfolio,” Lawler mentioned in a statement. “Despite having taken out over $20 billion of leverage and financial commitments, we consider this restructuring is necessary for the very long-expression results and value development of the enterprise.”

Chesapeake’s downturn is not distinctive. Whiting Petroleum is between the other the moment excellent drillers that couldn’t endure a historic plunge in oil prices. The organization submitted for bankruptcy security on April one.

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