A employee on a Chesapeake Power pure gasoline rig in Fort Value, TexasMatt Nager | Bloomberg | Getty PicturesChesapeake Power, the poster little o
A employee on a Chesapeake Power pure gasoline rig in Fort Value, Texas
Matt Nager | Bloomberg | Getty Pictures
Chesapeake Power, the poster little one of the U.S. shale revolution, filed for chapter safety on Sunday. The transfer comes as the corporate and trade extra broadly has been rocked by a drop in oil and gasoline costs amid the coronavirus pandemic.
The closely indebted firm has been in hassle for a while, and in Could mentioned that it had considerations relating to its long-term viability.
Chesapeake mentioned that $7 billion in debt will probably be worn out by way of the restructuring. The corporate has secured $925 million in debtor-in-possession financing in an effort to proceed operations in the course of the chapter course of. As well as, Chesapeake has secured an settlement in precept from sure present lenders for $2.5 billion in debt financing on emergence from chapter, in addition to a backstop dedication for $600 million in new fairness.
Franklin Assets and Constancy are among the many greatest collectors, in accordance with folks near the corporate, and they are going to be among the many main fairness holders following the corporate’s restructuring. The corporate will proceed operations at a a lot diminished capability, with a handful of gasoline rigs and no oil rigs, in accordance with these accustomed to the corporate’s plans.
“We’re essentially resetting Chesapeake’s capital construction and enterprise to handle our legacy monetary weaknesses and capitalize on our substantial operational strengths,” CEO Doug Lawler mentioned in a press release.
Chesapeake Power was based in 1989 by Aubrey McClendon. An early pioneer of horizontal drilling, he constructed the corporate right into a key participant within the U.S. gasoline trade. At its peak, Chesapeake had 175 working rigs, with operations throughout the U.S. together with in Texas, Louisiana, Pennsylvania and Ohio.
However the firm took on a number of debt to gasoline its speedy enlargement, and from 2010 to 2012 spent $30 billion extra in drilling and leasing than it made out of its operations.
McClendon was in the end ousted from the corporate in 2013, and in 2016 was indicted on federal prices of conspiring to rig bids for oil and pure gasoline leases for a brand new enterprise he had began. The next day, McClendon perished in a automotive crash.
When present CEO Doug Lawler succeeded him, the corporate had almost as a lot debt as Exxon and Chevron mixed.
“Over the past a number of years, our devoted workers have reworked Chesapeake’s enterprise — enhancing capital effectivity and operational efficiency, eliminating prices, decreasing debt and diversifying our portfolio,” Lawler mentioned in a press release. “Regardless of having eliminated over $20 billion of leverage and monetary commitments, we imagine this restructuring is important for the long-term success and worth creation of the enterprise.”
Chesapeake’s downturn is just not distinctive. Whiting Petroleum is among the many different as soon as nice drillers that could not survive a historic plunge in oil costs. The corporate filed for chapter safety on April 1.
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