Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Chesapeake Energy emerges from bankruptcy and shifts back to natural gas

Published 02/09/2021, 04:56 PM
Updated 02/09/2021, 05:20 PM
© Reuters. FILE PHOTO: Chesapeake Energy Corporation's 50 acre campus

© Reuters. FILE PHOTO: Chesapeake Energy Corporation's 50 acre campus

By Jennifer Hiller

HOUSTON (Reuters) - U.S. shale producer Chesapeake Energy Corp (NYSE:CHK) on Tuesday exited Chapter 11 bankruptcy with business plan that nods to its founders' emphasis on natural gas after a recent push into crude oil.

Once the second-largest U.S. natural gas producer, Chesapeake was felled by a long slide in gas prices and heavy debts from overspending on deals. Two years ago it paid $4 billion in a bet on shale oil firm WildHorse Resource Development. But oil prices fell after the deal closed.

The company plans to focus 85% of this year's spending on gas fields in the U.S. Northeast and Louisiana, and will let its oil output decline, Chief Executive Doug Lawler said in an interview.

It aims to spend between $700 million and $750 million per year on new projects that could generate $400 million in annual free cash flow, he said.

Chesapeake filed for court protection last June and won approval last month for a plan that shed about $7.7 billion in debt.

It was unable to invest enough in operations to turn a profit while simultaneously paying down $9 billion in debt. That "led us to make decisions that weren't always the best," said Lawler, who took over the firm in 2013.

"We were never able to invest in our assets to the benefit of our shareholders," he said.

Chesapeake last week dismissed 220 workers, or 15% of its workforce, and said raised $1 billion in new debt to complete its bankruptcy exit.

Two of Chesapeake's oilfields in South Texas and in the Powder River Basin in Wyoming have kept their costly gas transportation agreements despite the bankruptcy. That makes future oil investments most likely instead in its Brazos Valley field in Central Texas it bought from WildHorse, which has cheaper transportation costs, said John Thieroff, vice president at debt rating firm Moody's (NYSE:MCO) Investors Service.

The company will have around $100 million in interest payments annually, down from $650 million in 2019, Thieroff said.

© Reuters. FILE PHOTO: Chesapeake Energy Corporation's 50 acre campus

Chesapeake was founded in 1989 by wildcatters Aubrey McClendon and Tom Ward. As CEO McClendon snapped up drilling land across the United States in a belief that gas prices would stay high. However, McClendon stepped down in 2013, as investigations swirled into possible antitrust violations, and later died in a car accident.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.