Chesapeake Energy: An Overview And Predictions of How Bankruptcies Will Play Out

Chesapeake Energy: rise and fall of a US shale star

Derek Brower, US energy editor

Oil and gas group once worth $35bn is flirting with bankruptcy in face of coronavirus crash


Excerpt.  Link to full article at the bottom.  Good overview of CHK and future bankruptcy of others

Chesapeake Energy spearheaded the shale revolution a decade ago that ushered in an era of US energy independence, embodying a period of corporate extravagance as it rose to become a $35bn company. Now the indebted group is on the brink of a bankruptcy that would make it the biggest casualty of the turmoil sparked by coronavirus that is ravaging America’s oil and gas sector. Its shares have plunged 90 per cent since January, taking its market capitalisation to just $130m. Bond markets are pricing in default. A reverse stock split in April raised fears of imminent insolvency. A Chapter 11 filing is at best “a matter of weeks, not months away”, said a restructuring adviser to one of Chesapeake’s creditors, adding that this would open the floodgates for other bankruptcies across the sector. A smaller Chesapeake, freed of liabilities and more tightly focused on natural gas in the prolific Marcellus shale of the US north-east, is likely to emerge from the restructuring. Doug Lawler, chief executive since 2013, has battled for years to clean up the company’s balance sheet and lighten a $23bn debt pile amassed during a period of explosive growth under predecessor Aubrey McClendon. “He inherited a company that was unsustainable,” said a former Chesapeake executive. But the coronavirus pandemic and brutal oil-price collapse have hastened the decline. “There’s not much even a great CEO can do to change the reality of the commodity price crash.”

 

https://www.ft.com/content/bf230420-a570-4fcb-a2cf-3c38b5429b6f

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Pioneer Energy Services

San Antonio’s Pioneer Energy comes out of bankruptcy — amid industry turmoil

Randy Diamond June 3, 2020 expressnews.com

With its debt cut by nearly 60 percent, Pioneer Energy Services Corp. has emerged from Chapter 11 bankruptcy in an attempt to profit in the depressed oil-field services industry.

The San Antonio company’s reorganization plan, approved four months after seeking bankruptcy protection, slashes Pioneer’s debt to $208 million from $475 million. As part of an agreement with creditors, Pioneer secured a $75-million revolving credit facility.

Pioneer CEO Stacy Locke said the restructured company will be looking to acquire other oil-field service firms.

“The industry needs to consolidate,” he said. “There needs to be fewer companies.”

In a landscape littered with other oil-field service companies near bankruptcy, Lock said acquisitions will enable Pioneer to obtain the scale necessary to succeed.

At its peek in 2014, Pioneer had more than 60 oil drilling rigs and more than 4,000 employees as fracking reinvigorated the oil industry in Texas and other parts of the U.S.

That was the last year Pioneer made a profit. Now, the number of rigs is down to 10, mostly in the Permian Basin in West Texas. The company has just under 1,000 workers.

Pioneer certainly has a chance to survive, with the price of West Texas Intermediate, the U.S. oil industry benchmark, rising to nearly $37 a barrel, said Ed Hirs, an energy economics lecturer at the University of Houston.

He said the recent price increase should boost oil exploration, which plummeted as government stay-at-home orders cut demand for gasoline and jet fuel and world markets were glutted with crude.

WTI slid to $25 a barrel in early March when Pioneer Energy filed for bankruptcy protection. The continued to slide, dropping to under $20 a barrel in May.

“Everyone talks about being an opportunistic investor and acquiring other companies and other rigs in a downturn like this,” Hirs said. “Sometimes that works. Sometimes the companies can become too aggressive and over-commit themselves.”

Early on, Pioneer’s reorganization plan ran into trouble after key creditors Credit Suisse, DW Partners LP and Whitebox Advisors LLC attempted to withdraw from the deal, citing Covid-19-related damage to the oil market, according to bankruptcy court documents. The creditors, which held $117 million of Pioneer’s debt, originally had agreed to swap senior notes for equity in the company.

In turn, lenders such as the global money manager BlackRock Inc. and MSD Capital, the firm that manages the investments of Dell founder Michael Dell, were to be repaid in full for their $175 million in loans to Pioneer.

Under a revised deal, May 12 court documents show, BlackRock and MSD Capital will purchase $45.9 million of $65.2 million in convertible bonds from Credit Suisse and the other bondholders.

BlackRock and MSD Capital also will purchase about $78 million in newly-issued Pioneer secured bonds.

“We had that group of guys trying to get out of the deal, and it was just a bunch of mayhem,” Locke said.

Working out an agreement with all the parties took an additional month, he said, “but we got it done.”

 

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