NEW YORK (AP) — Chesapeake Energy, a shale drilling pioneer that helped to turn the United States (US) into a global energy powerhouse, has filed for bankruptcy protection.
The Oklahoma City-based company said on Sunday that it was a necessary decision given its debt. Its debt load is currently nearing USD9 billion. It has entered a plan with lenders to cut USD7 billion of its debt and said it 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 because of its environmental impact.
Other wildcatters followed in Chesapeake’s path, racking up huge debts to find oil and gas in fields spanning New Mexico, Texas, the Dakotas and Pennsylvania. A reckoning is now coming due with those massive debts needing to be serviced by Chesapeake and those that followed its path.
More than 200 oil producers have filed for bankruptcy protection in the past five years, a trend that’s expected to continue as a global pandemic saps demand for energy and depresses prices further.
Founded in 1989 with an initial USD50,000 investment, Chesapeake focussed on drilling in underdeveloped areas of Oklahoma and Texas. It largely abandoned traditional vertical well drilling, employing instead lateral drilling techniques to free natural gas from unconventional shale formations.
It became a colossus in the energy markets, eventually reaching a market valuation of more than USD37 billion. Then, the first in a series of financial shocks hit Chesapeake as the Great Recession sent energy prices into the basement.
The company closed last Friday valued at around USD115 million.
Chesapeake grew with lightning speed under one-time CEO Aubrey McClendon, known for his aggressiveness acquiring oil and gas drilling rights. He pushed the company to acquire enormous tracks of land in several states, taking on mounting debt along the way. Chesapeake in some ways became a victim of its own success as other companies followed its lead and US energy production soared, driving down prices.