- US shale oil pioneer Chesapeake Energy filed for bankruptcy protection on Sunday, bowing to pressure from heavy debt and rock-bottom energy demand levels during COVID-19.
- Chesapeake filed for Chapter 11 protection in a Texas bankruptcy court to facilitate a "comprehensive balance sheet restructuring," according to its filing.
- Founded in 1989 in energy-state Oklahoma, the company has long battled high levels of debt, but came under particular pressure during the pandemic.
- Chesapeake was slammed with a "strong sell" rating and a $0 price target when global energy prices collapsed and oil prices briefly turned negative earlier this year.
- Visit Business Insider's homepage for more stories.
Chesapeake Energy filed for bankruptcy on Sunday, making it the biggest casualty among US energy giants as the coronavirus pandemic upends the oil industry.
Chesapeake has been loaded with debt for a long time but even more so since the start of the pandemic, which has weighed heavily on demand for energy markets.
When oil prices briefly turned negative in April after a collapse in energy prices, the company was issued a rare "strong sell" rating and slapped with a $0 price target by CFRA Research.
The oil-and-gas group, which was once worth $35 billion by market capitalization, pioneered the entry into shale production a decade ago, setting the scene for the US to become one of the leaders in the controversial field.
Doug Lawler, CEO since 2013, was made to lead the company at a time when it was already overburdened with about $13 billion debt.
"Despite having removed over $20 billion of leverage and financial commitments, we believe this restructuring is necessary for the long-term success and value creation of the business," Lawler said in the filing.
Chesapeake plans to do away with $7 billion of its debt, according to the filing, and will operate ordinarily during the Chapter 11 process.
It said it entered into a restructuring agreement with lenders backing its main revolving credit facility, with some providing $925 million under debtor-in-possession financing.
That will help fund its operations during the bankruptcy process.
Chesapeake's shares were down 7% in pre-market trading.
Analysts say over 200 energy companies face possible bankruptcy in the next two years in case oil prices remain around current levels, according to the Wall Street Journal.