Chesapeake Energy says bankruptcy isn’t on the table despite Monday’s free fall of its stock price.
The Oklahoma City-based oil and natural gas giant’s stock dropped 50 percent at one point during Monday morning trading due to media reports it hired restructuring attorneys.
“Kirkland & Ellis LLP has served as one of Chesapeake's counsel since 2010 and continues to advise the company as it seeks to further strengthen its balance sheet following its recent debt exchange,” the company said in a statement. “Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders.”
A reminder: Last month, it was reported Evercore was helping Chesapeake with "restructuring." pic.twitter.com/TTPM1t38vN
— Paul Monies (@pmonies) February 8, 2016
Chesapeake closed Friday’s trading at $3.06 a share, and opened Monday at $2.56. At one point Monday morning shares were down to $1.51, having been halted at least six times, CNBC reports:
Chesapeake, which has more than $10 billion in debt, has been hit by a steep fall in both oil and gas prices. Reuters reported that the company's bonds maturing next month plunged 20 points, to a level of 75 cents on the dollar, on the news.
Today’s price drop is the company’s biggest loss since it started trading 23 years ago. Bloomberg’s Joe Carroll writes Chesapeake will post a second-straight annual loss, blaming it on the oversupply of natural gas that’s keeping prices low and preventing the cash flow it needs to pay its debts:
Chesapeake’s 12-month loss to about 93 percent. The free fall wiped out $838 million in market value in the first hour of trading on Monday. Burdened with a debt load eight times larger than its market value, Chesapeake has been canceling drilling projects, trimming its workforce and closing offices to slow the rate at which it burns through cash. Gas, which accounts for about 80 percent of Chesapeake’s production, has averaged about $2.56 per million British thermal units during the past year, down 38 percent from a year earlier.
As we’ve reported, the collapse of oil and gas prices forced Chesapeake to lay off 740 employees, including 562 in Oklahoma City, last September. The company has also been sued by the state of Pennsylvania for “deceptive” leases, and was fined $2.1 million last year for under-reporting production on Native American leases.
Former CEO Aubrey McClendon has been embroiled in a legal battle with the company he founded over allegedly stealing trade secrets to his new venture, American Energy Partners.
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