Shale pioneer Chesapeake Energy files for bankruptcy

Andrew Cummings
July 1, 2020

It also is seeking court approval to spend $925 million during the bankruptcy process to keep the business operating normally. Crestwood has been preparing for this event over the past few months and is well-positioned to maintain full operations to Chesapeake throughout bankruptcy proceedings. The RSA is also backed by creditors, including those holding 87% of its term loan, 60% of its senior secured second lien notes due 2025 and around 27% of senior unsecured notes. Robert Doug Lawler was named CEO of Chesapeake Energy after McClendon's death. Crestwood gathers and processes Chesapeake's natural gas and liquids in the Powder River Basin and Marcellus fields.

Chesapeake Energy, a shale drilling pioneer that helped to turn the United States into a global energy powerhouse, has filed for bankruptcy protection. Then, the first in a series of financial shocks hit Chesapeake as the fallout from the global financial crisis of 2008 sent energy prices into the basement. Its plan is to eliminate a further $7 billion of debt.

The Chapter 11 paperwork was filed with the U.S. Bankruptcy Court in the Southern District of Texas. It lost $8.3bn in the first quarter and had just $82mn of cash left at the end of March. One of the first concrete signs of an imminent filing for bankruptcy protection came though in May when the pandemic's effect on oil prices was well-established. Founded in 1989, it became the world's second-largest natural gas producer in the 2000s, as hydraulic fracturing and horizontal drilling uncovered huge reserves of oil across USA states.

The producer, which spent heavily to become the top US producer of natural gas at one point, is still the No. 2 shale gas producer behind EQT Corp, according to data provider Enverus.

By 2012, Chesapeake carried a debt load twice the size of the much larger ExxonMobil which would ultimately lead to the ouster of McClendon in 2013 and the recruitment of Lawler who was previously an exploration executive at Anadarko Petroleum.

"Despite having removed over $US20 billion of leverage and financial commitments, we believe this restructuring is necessary for the long-term success and value creation of the business", Lawler said in the filing. He also developed complicated financial deals with Wall Street banks that allowed Chesapeake to take an upfront payment in exchange for future drilling revenue.

The energy giant's share price has dropped more than 93 percent since January, from $172 to $11.85 as of close on Friday.

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 USA into a major exporter of fossil fuels after years of dependence on overseas suppliers. "Chesapeake showed the market-and its competitors-how quickly production could grow, how fast projects could develop, and what the updated U.S. model for engaging with stakeholders looked like".

The company fell victim to its own success after pioneering the shale drilling process in the USA, which led to natural gas prices falling from $20 per million British thermal units to below $2 due to the high supply created by the firm and its competitors.

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