Shale gas pioneer Chesapeake Energy taps restructuring advisers

Oil&Gas Materials 17 March 2020 02:35 (UTC +04:00)
Shale gas pioneer Chesapeake Energy taps restructuring advisers

Chesapeake Energy Corp (CHK.N), the oil and gas exploration and production company that helped spearhead the U.S. shale revolution, has tapped debt restructuring advisers amid a rout in energy prices, people familiar with the matter said on Monday, Trend reports citing Reuters.

The Oklahoma City-based company, which was co-founded by late wildcatter Aubrey McClendon, was struggling with its debt pile of roughly $9 billion even before an oil price war between Saudi Arabia and Russia and the fallout from the coronavirus pandemic contributed to driving its shares down more than 50% in the last three weeks.

Chesapeake has enlisted restructuring lawyers at Kirkland & Ellis LLP and investment bankers at Rothschild & Co who specialize in reworking debt, the four sources said. The company is studying its options and no debt restructuring move is imminent, the sources added, asking not to be identified because the deliberations are confidential.

Chesapeake, Kirkland and Rothschild had no immediate comment.

The advisers Chesapeake has enlisted have counseled on significant restructurings of large energy companies, including utility Energy Future Holdings Corp, the record $45 billion leveraged buyout that collapsed in 2014. Since 2018, Rothschild has partnered with Intrepid Financial Partners, a firm co-founded by former senior Barclays Plc (BARC.L) executive Hugh “Skip” McGee, when advising oil and gas firms. Intrepid did not immediately respond to a request for comment.

Chesapeake has already been making moves to secure more financial breathing space. It has refinanced debt, exchanged existing liabilities for new ones that mature later, and created new liens within its debt structure.

The company said in January it had cut debt by $900 million, and in February added it had ample liquidity of about $1.4 billion to address looming debt maturities.

Nevertheless, those pronouncements preceded significant worldwide market turmoil and economic uncertainty stemming from the coronavirus crisis, as well as a recent plunge in oil prices. The developments have pressured oil and gas producers across the board, and prompted Chesapeake to take yet another hard look at its financial books.

Chesapeake shares are down 75% so far this year and were off more than 30% on Monday, giving it a market capitalization of just under $400 million.

The company has said it is pursuing a reverse stock split to avoid being delisted from the New York Stock Exchange.

Its 11.5% bonds due in 2025, issued in December as part of a broader reworking of its liabilities, are trading around 14 cents on the dollar, giving a presumptive yield of 94.4%, according to Refinitiv Eikon data.

Chesapeake was founded in 1989 and was one of the pioneers of the production of shale gas. It has been pivoting to generate more oil, growing production 30% year-over-year in 2019, according to a February investor presentation.

Chesapeake has operations in five U.S. states, including Pennsylvania, Texas and Louisiana.