Chesapeake Energy Corp rebounds after bankruptcy fears wipe off half its value

Chesapeake Energy Corp. said it doesn’t have plans to seek bankruptcy protection, dismissing a report that destroyed half the U.S. gas driller’s value.

Kirkland & Ellis LLP has served as one of Chesapeake’s counsel since 2010 and continues to advise the company because it seeks to further strengthen its balance sheet following its recent debt exchange, Chesapeake said in a statement Monday. The company’s shares dropped an archive 51 percent after Debtwire reported that Chesapeake retained what the law states firm to help restructure a $9.8 billion debt load. Losing was pared to 24 percent after the company’s statement.

Here’s exactly what the stock dive appeared as if in early trading

Burdened with a debt load eight times bigger than its market price, Chesapeake continues to be cancelling drilling projects, trimming its workforce and closing offices to slow the rate where it burns through cash. Gas, which makes up about about 80 per cent of Chesapeake’s production, has averaged about $2.56 per million British thermal units in the past year, down 38 percent from the year earlier.

Chesapeake is the latest U.S. shale driller to flirt with collapse like a crushing glut of gas and crude renders companies increasingly eager to avoid insolvency. Houston-based Halcon Resources Corp, retained the Weil, Gotschal law firm to understand more about bankruptcy, TheDeal.com reported on Feb. 5, citing a person this didn’t identify. Chesapeake and Halcon both suspended dividend payouts on preferred shares last month.

Cash Shortfall

Chesapeake, which pumps more U.S. gas than any driller other than Exxon Mobil Corp., has $1.3 billion in debts maturing by the end of 2017. Analysts expect Chesapeake to possess a cash shortfall of more than $1 billion over the next two years.

The shares were trading at $2.32 at 11:47 a.m., after sliding probably the most since their debut in 1993 and touching $1.50. Chesapeake will post a second consecutive annual loss this season being an oversupply of United states gas weighs on prices and erodes cash flows the organization must pay its debts, based on forecasts published by Bloomberg.

Here’s exactly what the recovery appeared as if at midday

Chesapeake is scheduled to disclose fourth-quarter and full-year 2015 results on Feb. 24. A voice mail and e-mail playing the business’s media relations office weren’t immediately returned. Kate Slaasted and Olivia Clarke, spokeswomen for Kirkland & Ellis, didn’t immediately react to messages seeking comments.

Bonds Plunge

The company’s bonds led losses among high-yield debt on Monday. Chesapeake’s notes due March 2016 tumbled with a record to 74.5 cents, from 95 cents last week, while its bonds maturing in 2017 fell for an all-time low at 34 cents.

Standard & Poor’s recently cut Chesapeake’s credit-rating to “CCC+” having a negative outlook on assumptions that oil and gas prices will stay weak. The company’s debt leverage is unsustainable, S&P said.

The company was the worst performer around the Standard & Poor’s 500 Index on Monday.
Bloomberg.com