Moscow, Jun 29, 2020 (Sputnik) – Chesapeake Energy, a major oil and gas producer and a US shale pioneer hard-hit by the recent drop in oil prices, has filed for bankruptcy, the company announced in a statement.
“Chesapeake Energy Corporation today announced that the Company has voluntarily filed for Chapter 11 protection in the US Bankruptcy Court for the Southern District of Texas (‘the Court’) to facilitate a comprehensive balance sheet restructuring”, the company said on Sunday.
According to the Sunday release, Chesapeake will operate as usual during the Chapter 11 process. The company has agreed with most creditors to eliminate $7 billion of debt and has secured $925 million in debtor-in-possession financing from certain lenders, which will provide it with necessary funds to continue operating through the bankruptcy.
“We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths. By eliminating approximately $7 billion of debt and addressing the legacy contractual obligations that have hindered our performance, we are positioning Chesapeake to capitalize on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence”, Doug Lawler, Chesapeake’s President and Chief Executive Officer, said.
Lawler assured that the company will emerge from the bankruptcy process a stronger and more competitive enterprise and thanked all employees for their commitment to improving capital efficiency and operational performance.
The US shale industry is entering a period of ‘great compression’ and could face up to $300 billion in losses and a wave of bankruptcies due to the coronavirus pandemic, a study released by the global accountancy firm Deloitte this month showed.
According to Deloitte’s new study, dubbed ‘The Great Compression: Implications of COVID-19 for the US Shale Industry’, about a third of today’s US shale operators are technically insolvent with oil prices at $35 per barrel, and some 50 percent at $20 per barrel.
The International Energy Agency announced this month that US oil production is set to fall by 0.9 million barrels per day this year and a further 280,000 barrels per day next year due to low oil prices, weak demand and limited storage availability.