As the demand for crude oil continues to remain low and inventories pile up amid the coronavirus pandemic, many oil producers in the US are beginning to succumb to the pressure. One of America’s biggest oil and gas companies, Chesapeake Energy Corporation (OTC: CHKDP), has been crumbling under the weight of mounting debt and a coronavirus-induced oil price downfall. As a result, the shale pioneer has filed for Chapter 11 bankruptcy protection.
During the first quarter of 2020, Chesapeake reported a net loss of $8.3 billion, with a further $9.5 billion tied up in long-term liabilities, and only $82 million worth of cash. As per the bankruptcy filing, the company has been able to have approximately $7 billion worth of debt forgiven by lenders, secure a $925 million revolving credit facility, and be subject to a future commitment regarding new equity in the amount of $600 million.
However, according to Crestwood Equity Partners LP, which supplies the company with pipelines, Chesapeake will not be negatively impacted from the bankruptcy filing. Allegedly, Chesapeake is up to date on its outstanding invoices, and has obtained further cash flow protection via letters of credit.
Going forward, Chesapeake will significantly reduce its drilling output, and focus on keeping a limit number of rigs operating. According to the regulatory filing, the company will continue its rig program, but only maintain between 6 to 8 rigs over the next two years, followed by 7 to 8 rigs between 2022 and 2024.
Information for this briefing was found via CNN, CBC News, and Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.