Chesapeake Energy exits bankruptcy and reverts to natural gas

0


HOUSTON (Reuters) – U.S. shale producer Chesapeake Energy Corp emerged from Chapter 11 bankruptcy on Tuesday with a business plan reminiscent of its founders’ focus on natural gas after a recent push into crude oil.

FILE PHOTO: The 50-acre campus of Chesapeake Energy Corporation is seen in Oklahoma City, Oklahoma, April 17, 2012. REUTERS / Steve Sisney

Once the second largest producer of natural gas in the United States, Chesapeake has been struck down by a long decline in gas prices and heavy debts due to overspending related to the agreements. Two years ago, he paid $ 4 billion for a bet on shale oil company WildHorse Resource Development. But oil prices fell after the deal was struck.

The company plans to focus 85% of spending this year on gas fields in the northeastern United States and Louisiana, and will let its oil production 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 legal protection last June and got approval last month for a plan that reduced debt by about $ 7.7 billion.

He has not been able to invest enough in the operations to generate a profit while simultaneously paying off $ 9 billion in debt. It “led us to make decisions that weren’t always the best,” said Lawler, who took over the firm in 2013.

“We have never been able to invest in our assets for the benefit of our shareholders,” he said.

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

Two of the Chesapeake oil fields in South Texas and the Powder River Basin in Wyoming retained their costly gas transportation deals despite bankruptcy. This makes future oil investments more likely in his Brazos Valley field in central Texas that it bought from WildHorse, which has cheaper transportation costs, said John Thieroff, vice chairman of rating firm Moody’s. Investors Service.

The company will receive around $ 100 million in interest payments per year, up from $ 650 million in 2019, Thieroff said.

Chesapeake was founded in 1989 by wild hunters Aubrey McClendon and Tom Ward. As CEO, McClendon grabbed drilling lands across the United States in the belief that gas prices would remain high. However, McClendon resigned in 2013, as investigations revolved around possible antitrust violations, and later died in a car crash.

Reporting by Jennifer Hiller; Editing by Marguerita Choy



Source link

Share.

Comments are closed.