Chesapeake Energy Corporation has become the largest oil and gas company to file for bankruptcy protection during the coronavirus pandemic. Chesapeake was once the nation’s No. 2 natural gas producer, thanks to early bets on fracking. Aubrey McClendon, Chesapeake’s late founder and CEO, was considered one of the leaders of the shale boom that transformed the United States into the world’s largest oil and natural gas producer.
More recently, bankruptcy rumors had swirled around Chesapeake (CHK) as the company grappled with depressed energy prices, a poorly timed push into oil, and a mountain of debt. The coronavirus crisis exacerbated those challenges. Despite a recent recovery to $40 a barrel, the price of oil has fallen sharply this year because of excess supply and a sharp drop in demand caused by worldwide stay-at-home orders.
Chesapeake’s share price has dropped more than 93% since January, from $172 to $11.85 as of close on Friday. Earlier this month, Chesapeake skipped interest payments of $13.5 million, according to filings with the US Securities and Exchange Commission. The company had a 30-day grace period before it would be considered in default.
Chesapeake said in a statement Sunday that the Chapter 11 bankruptcy protection would help it to “strengthen its balance sheet and restructure its legacy contractual obligations to achieve a more sustainable capital structure.”
The company posted an $8.3 billion net loss during the first quarter of 2020. It also reported nearly $9.5 billion in long term liabilities and just $82 million in cash.