Chesapeake moves to quash bankruptcy fears as shares plunge

Mon Feb 8, 2016 4:01pm EST
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By Jessica DiNapoli and Mike Stone

(Reuters) - Chesapeake Energy, the No. 2 U.S. natural gas producer, said on Monday it had no plans to file for bankruptcy, after sources told Reuters the company had asked its longtime counsel to look at restructuring options.

Chesapeake's shares were halted after plunging more than 50 percent but later pared some losses, as it said advisers Kirkland & Ellis had been providing counsel since 2010 and will continue to help the company strengthen its balance sheet.

Trade publication Debtwire had reported the engagement of Kirkland & Ellis on Friday evening, prompting Chesapeake's shares to drop early on Monday to $1.50 on fears it might soon make one of the biggest bankruptcy filings of the current crash in oil and natural gas prices.

The company, seeking to downplay those worries, said it "currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders."

With more than $10 billion in bonds, the oil and gas producer's balance sheet is under pressure and its equity market capitalization is around just $1.2 billion.

In addition to its debt, filings show Chesapeake has commitments to pay about $2 billion a year for space on pipelines run by several companies, including Williams Companies Inc, whose shares fell 35 percent on Monday, in part on its exposure to Chesapeake.

Chesapeake had cash on hand of about $1.8 billion on Sept. 30, according to public filings. That is plenty to pay $500 million in debt due in March, though at least another $1.3 billion will come due through 2018.

Once a Wall Street darling that in many ways symbolized the U.S. fracking revolution, Chesapeake has struggled since a governance crisis prompted the departure of its founder and former Chief Executive Aubrey McClendon in 2013. Prominent Chesapeake shareholders include Carl Icahn.   Continued...

Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, on April 17, 2012.   REUTERS/Steve Sisney