Chesapeake Energy Corp. successfully concluded its restructuring process and emerged from Chapter 11 bankruptcy, the U.S. shale producer said in a Feb. 9 release.
“Today marks a new day for Chesapeake,” Doug Lawler, Chesapeake’s president and CEO, said in a statement in the release. “We have fundamentally reset our business, and with an improved capital and cost structure, disciplined approach to capital reinvestment, diverse asset base and talented employees, we are poised to deliver sustainable free cash flow for years to come.”
Following its reorganization, Chesapeake operations will focus primarily on gas production. The company plans to direct 85% of its capital to its top-tier Marcellus and Haynesville assets this year. As a result, analysts with Enverus expect Chesapeake’s total production to remain flat but gas plays will drive considerable growth over the next three years to offset fairly steep oil declines.
“Its NE Marcellus asset, we believe, is home to some of the lowest-cost gas resource in the U.S., although long-term gas takeaway remains an issue,” Shaw Stuart, an analyst with Enverus, wrote in a research note on Feb. 9. “The Haynesville, meanwhile, is the only highly-economic basin where the company can offset declining volumes elsewhere in its portfolio over the long term.”
In addition to cutting 15% of its workforce earlier this month, Chesapeake raised $1 billion in notes to complete its bankruptcy exit.
Alongside its emergence from bankruptcy, Chesapeake also unveiled a commitment to achieve net-zero greenhouse gas (GHG) direct emissions by 2035 among other environmental targets.
“Our unwavering resolve to leading a responsible energy future has never been greater, and our pledge to achieve net zero GHG direct emissions by 2035, eliminate routine flaring on new completions immediately, and significantly reduce our methane and GHG emission intensity by 2025, place Chesapeake on a path toward setting a new standard of environmental excellence in our industry,” Lawler added in his statement.
Chesapeake filed for court protection in June 2020, marking the marks the biggest U.S. oil and gas producer to go bankrupt since the downturn related to the COVID-19 health crisis began. The Oklahoma City-based company, which helped spearhead the shale revolution a decade ago, had widely been expected to enter bankruptcy as it struggled with mounting debt burdens.
The company’s bankruptcy plan was approved by a U.S. judge in January, giving lenders control of the firm and ending a contentious trial.
Under the court-approved plan, approximately $7.8 billion of Chesapeake’s debt has been equitized, and the company’s preferred and common equity interests have been cancelled as of Feb. 9, the company release said.
Also in accordance with the plan, a new board of directors was appointed and already established the company’s first Environmental and Social Governance Committee dedicated to ESG oversight and excellence.
The new Chesapeake board consists of:
- Chairman Michael Wichterich;
- Timothy S. Duncan;
- Benjamin C. Duster IV;
- Sarah Emerson;
- Matthew M. Gallagher;
- Brian Steck; and
- Doug Lawler.
Chesapeake’s new common shares will be listed on the NASDAQ Exchange under the ticker symbol “CHK,” and are expected to commence trading on Feb. 10. At emergence, Chesapeake will have approximately 100 million new common shares issued and outstanding, with additional shares to be issued upon exercise of three tranches of warrants, each with exercise provisions.
In the Feb. 9 release, Chesapeake said average daily production for fourth-quarter 2020 was approximately 435,000 boe/d. Full-year 2021 average daily production is projected to be approximately 427,000 boe/d. The company’s planned capex for 2021 includes operating an average of six rigs and two stimulation crews with an estimated spend of approximately $700 million.
Chesapeake Energy’s operations are focused a large and geographically diverse resource base of unconventional oil and natural gas assets from the Rockies to South Texas to Appalachia. Operating areas include positions in the Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Powder River Basin.
As part of a bankruptcy auction, Chesapeake sold some of its Midcontinent assets, including 752,000 net acres, to Tapstone Energy LLC for about $130 million.
NP Resources retained Detring Energy Advisors for the sale of its oil and gas leasehold and related interest located within the Williston Basin in North Dakota’s Billings, Golden Valley and McKenzie counties.
Whiting Petroleum retained Meagher Energy Advisors for the sale of its Retail upstream and midstream assets in Colorado’s Weld County including shallow decline, horizontal Niobrara producing properties.
Black Falcon Energy LLC, as managing company, retained EnergyNet for the sale of a Midcontinent opportunity in Arkansas, Kansas, Oklahoma and Texas through a sealed-bid offering closing June 3.