Chaparral Energy Inc. is working with debt restructuring advisers as it looks to shore up its cash position at a time of financial distress for U.S. oil and gas producers, people familiar with the matter said March 27.
The economic fallout of the coronavirus pandemic and an oil price war between Russia and Saudi Arabia have led to the price of crude oil dropping by half since the beginning of March. This is putting pressure on debt-laden energy companies such as Chaparral, which is focused on producing oil and gas in shale plays in Oklahoma.
Chaparral has hired financial advisers for advice on how to improve its balance sheet, the sources said, adding that no debt restructuring move is imminent.
Chaparral did not immediately respond to a request for comment.
The Oklahoma City-based company has around $421 million of debt outstanding, with its 8.75% bonds due in July 2023 currently trading at 25 cents on the dollar with a presumptive yield of 68.9%, indicating investor concerns about repayment, according to Refinitiv Eikon data.
In December, the company appointed Charles Duginski as CEO and announced an agreement with Strategic Value Partners, which allowed the hedge fund to nominate two directors to Chaparral's board. Strategic Value Partners owned 30% of Chaparral as of December.
Chaparral went through a bankruptcy process during the last oil price slump in 2014-16, emerging from Chapter 11 protection in March 2017.
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