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American hydrocarbon exploration firm Chesapeake Energy has voluntarily filed for bankruptcy in the US Bankruptcy Court for the Southern District of Texas.
The heavily indebted company has been in trouble for some time and the oil and gas price rout stoked by the Covid-19 pandemic has proven to be the final blow.
The novel coronavirus has created unprecedented disruption across the world, which has resulted in historically low and volatile prices.
Chesapeake noted that it signed a restructuring support agreement with lenders and said that its $7bn debt will be wiped out through the restructuring.
The company has secured $925m in debtor-in-possession (DIP) financing so as to continue operations during the bankruptcy process.
Chesapeake president and CEO Doug Lawler said: “We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses and capitalise on our substantial operational strengths.
“By eliminating approximately $7bn of debt and addressing the legacy contractual obligations that have hindered our performance, we are positioning Chesapeake to capitalize on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence.
“With these demonstrated strengths, and the benefit of an appropriately sized capital structure, Chesapeake will be uniquely positioned to emerge from the Chapter 11 process as a stronger and more competitive enterprise.”
In February last year, Chesapeake Energy completed the previously announced $3.97bn acquisition of the WildHorse Resource Development, following shareholder approval.
In July 2018, Chesapeake Energy signed a $2bn agreement to divest its Utica Shale acreage in Ohio, US, to oil and gas firm Encino Acquisition Partners to repay debts.
In January 2018, the company planned to cut 400 jobs, or around 13% of its workforce, as part of its efforts to reduce costs.