Chesapeake Energy, the pioneer of oil shale gas drilling that helped make the United States a global energy power, filed for bankruptcy.
The Oklahoma City-based company said Sunday it had been forced to enter Chapter 11 protection because its $ 9 billion debts were unmanageable.
He has entered into a plan with lenders to reduce $ 7 billion of his debt and said he will continue to operate as usual during the bankruptcy process.
The oil and gas company was a leader in the fracking boom, using unconventional techniques to extract oil and gas from the ground, a method that has come under scrutiny due to its environmental impact.
Other wild hunters followed the Chesapeake trail, piling up huge debts to find oil and gas in fields spanning New Mexico, Texas, the Dakotas, and Pennsylvania.
But those companies are now under pressure to pay off those debts. More than 200 oil producers have filed for bankruptcy protection in the past five years, a trend that is expected to continue as the Covid-19 pandemic weakens energy demand and further depresses prices.
Founded in 1989 by Aubrey McClendon and Tom Ward with an initial investment of $ 50,000, Chesapeake focused on drilling in underdeveloped areas of Oklahoma and Texas. It largely abandoned traditional vertical well drilling, instead employing lateral drilling techniques to release natural gas from unconventional oil shale formations.
It became a colossus in the energy markets, eventually reaching a market valuation of more than $ 37 billion. Then the first in a series of financial shocks hit Chesapeake when the aftermath of the 2008 global financial crisis sent energy prices down to the basement.
The company was valued at around $ 115 million at the close of business on Friday.
With the colorful McClendon as CEO, Chesapeake grew at lightning speed and was known for his aggressiveness in acquiring oil and gas drilling rights. McClendon pressured the company to acquire huge tracts of land in various states, taking on increasing debt along the way. Chesapeake somehow became a victim of its own success as other companies followed suit and energy production in the United States skyrocketed, lowering prices.
As Chesapeake expanded at breakneck speed, natural gas prices were close to $ 20 per million British thermal units, the benchmark for natural gas trade. But frackers like Chesapeake flooded the market with cheap natural gas, sending prices below $ 2.
But McClendon was forced to resign in 2013 on allegations of conspiracy to manipulate oil and gas contract offers for several years, and amid investor concerns over his large spending in what was already a heavily indebted sector. McClendon died in a car accident in 2016 hours after the US Justice Department filed charges of alleged market malpractice.
Chesapeake has paid millions of dollars since then to settle the offers fraud charges.
Robert Lawler became CEO after McClendon’s death and began selling assets to control Chesapeake’s debt. But that debt became more threatening in two years when the fracking boom turned bankrupt in 2015. Chesapeake reported a quarterly loss of $ 4 billion that year and the first wave of layoffs began with 750 jobs.
Despite Chespeake’s troubles, Lawler remained Oklahoma’s highest-paid CEO last year with $ 15.4 million in compensation, according to a ranking compiled by the Associated Press and Equilar.
Chesapeake lost $ 8.3 billion in the first quarter of this year, and recorded net debt of $ 8.62 billion. The company said in a regulatory filing in May that management has concluded that there are substantial doubts about the company’s ability to continue as a going concern.
For more than two decades, McClendon made Chesapeake one of the largest natural gas producers in the world and, in the process, helped make the United States a major exporter of fossil fuels after years of dependence on foreign suppliers.