Chesapeake Energy, the pioneer of shale gas drilling that helped transform the United States into a global powerhouse for energy, filed for bankruptcy protection.
The Oklahoma City-based company said Sunday it had been forced into Chapter 11 protection because its $ 9 billion debt was unmanageable.
He entered into a plan with lenders to cut $ 7 billion of his debt and said it will continue to function normally during the bankruptcy process.
The oil and gas company was a leader in the fracking boom, using unconventional techniques to extract oil and gas from the soil, a method that has been examined because of its environmental impact.
Other wildcatters followed Chesapeake̵
But those companies are now under pressure to face those debts. More than 200 oil producers have filed for bankruptcy protection in the past five years, a trend that was expected to continue with the demand for energy from Covid-19 pandemic lymph infusions which further depresses prices.
Founded in 1989 by Aubrey McClendon and Tom Ward with an initial investment of $ 50,000, Chesapeake has focused on drilling in underdeveloped areas of Oklahoma and Texas. He largely abandoned the traditional drilling of vertical wells, instead using lateral drilling techniques to free natural gas from unconventional shale formations.
It became a giant in the energy markets, eventually reaching a market valuation of over $ 37 billion. Thus, the first of a series of financial shocks hit Chesapeake as the aftermath of the 2008 global financial crisis brought energy prices to the basement.
The company was valued at approximately $ 115 million at the close of trading on Friday.
With the colorful McClendon as CEO, Chesapeake grew at lightning speed and was known for his aggression in acquiring oil and gas drilling rights. McClendon pushed the company to acquire huge traces of land in several states, taking on growing debts along the way. Chesapeake somehow became a victim of his own success as other companies followed suit and US energy production shot up, driving prices down.
As Chesapeake expanded rapidly, natural gas prices were close to $ 20 per million British thermal units, the benchmark for natural gas trading. But frackers like Chesapeake have invaded the market with cheap natural gas, dropping prices to well below $ 2.
But McClendon was forced to resign in 2013 on conspiracy charges over the rig of oil and gas contracts for several years and amid investor concerns over his huge expenses in what was already a heavily indebted sector. McClendon died in a car accident in 2016 hours after the US Department of Justice accused of alleged market negligence.
Chesapeake has since paid millions of dollars to liquidate the rigging allegations.
Robert Lawler became CEO after McClendon’s death and started selling assets to keep Chesapeake’s debt under control. But that debt became more threatening within two years when the fracking boom turned into a bankruptcy in 2015. Chesapeake had a quarterly loss of $ 4 billion that year and the first wave of layoffs began with 750 jobs. .
Despite Chespeake’s troubles, Lawler remained the highest paid CEO in Oklahoma last year with $ 15.4 million in compensation, according to a ranking compiled by the Associated Press and Equilar.
Chesapeake lost $ 8.3 billion in the first quarter of this year and listed $ 8.62 billion in net debt. The company stated in a regulatory filing in May that management concluded that there are substantial doubts about the company’s ability to continue operating continuously.
In over two decades, McClendon has transformed Chesapeake into one of the world’s largest natural gas producers and, in the meantime, has helped transform the United States into a major exporter of fossil fuels after years of dependence on foreign suppliers.