HOUSTON – Chesapeake Energy, a pioneer in the extraction of natural gas from rock shale across the country, presented bankruptcy protection on Sunday, unable to overcome a mountain of debt that has become unsustainable after a decade of stubbornly low gas prices.
The company helped convert the United States from a natural gas importer into a major exporter under the reckless leadership of Aubrey McClendon, the company’s co-founder and former CEO.
But McClendon overestimated the company and accumulated over $ 20 billion in debt before being forced to withdraw in 201
Chesapeake lost $ 8.3 billion in the first quarter of this year and had only $ 82 million in cash in late March. With $ 9.5 billion in debt at the end of last year, he has a $ 192 million bond payment due in August.
In a statement, Chesapeake said he was filing for Chapter 11 protection to facilitate a complete restructuring. As part of its deal with the lenders, the company said it had secured $ 925 million in financing with a revolving credit facility, and eliminated approximately $ 7 billion in debt. It also secured a future commitment of $ 600 million in new shares.
“We are basically restoring Chesapeake’s capital structure and business to address our legacy financial weaknesses,” said Doug Lawler, Chesapeake president and chief executive officer. “Chesapeake will be uniquely positioned to emerge from the Chapter 11 process as a stronger and more competitive venture.”
Chesapeake has 1,900 employees.
Under its former CEO Mr. McClendon, the company has punched Texas, Oklahoma, Ohio, Wyoming and Louisiana. McClendon was bold as he aggressively beat competitors on land leases and explored extensively in the early 2000s, although he also drilled many wells that disappointed investors. By 2011, he and others who followed in his footsteps had produced an excess of natural gas that brought Chesapeake and other companies to the brink of collapse.
To find use for all that natural gas, McClendon has embarked on a campaign to promote compressed natural gas vehicles, but the effort has gone nowhere. He sought to forge alliances with environmentalists, arguing that gas could replace coal and be a bridge to a cleaner energy future.
Before him In 2013, McClendon built a luxurious campus for the company in Oklahoma City, complete with a community garden, luxury dining facilities and two parking garages that alone cost $ 100 million.
He acquired trophy assets such as the Oklahoma City Thunder basketball team, interests in a French winery and a $ 12 million antique map collection. The basketball team still plays in the Chesapeake Energy Arena, which was a symbol of Oklahoma City’s awakening as a gas hub.
From 2010 to 2013, the company spent approximately $ 30 billion more on leasing and drilling than production.
McClendon was also known for cutting corners, which put him and his company in trouble. Chesapeake executives complained about the lack of a formal budget process or employee performance management system. The company borrowed money to finance charity and real estate projects.
McClendon was accused in 2016 of conspiring to suppress prices for oil and natural gas leases. The prosecution claimed to have orchestrated a conspiracy in which two oil and gas companies clashed over each other not to bid on several leases in northwestern Oklahoma between late 2007 and early of 2012.
The day after the indictment, Mr. McClendon, at the age of 56, died in an accident in Oklahoma City after his car hit a high-speed bridge. Upon hearing of McClendon’s death, oil magnate T. Boone Pickens, who passed away in 2019, said: “No individual is without flaws, but its impact on American energy will last long.”
When Mr. Lawler, an executive veteran of Anadarko, took over the management of the company in 2013, he called his new job “the biggest challenge in the industry”.
Mr Lawler had tried to go around the company by producing more oil and selling gas. But the shale drilling boom of the past few years has sparked more crude oil than the world needs, driving prices down. The coronavirus pandemic and a decision by Saudi Arabia and Russia this year to increase production were the latest hits.
Meanwhile, the economic downturn has cut demand for natural gas in the United States and reduced exports to foreign markets.
There have been rumors of bankruptcy for months. Around 20 American oil and gas producers have already filed for bankruptcy this year, including Ultra Petroleum and Whiting Petroleum. A total of 227 manufacturers filed for bankruptcy in the five years ending May 31, with over $ 134 billion in aggregate debt, according to Haynes and Boone Oil Patch Bankruptcy Monitor.