Please ensure Javascript is enabled for purposes of website accessibility

Report: Chesapeake Energy Hires Restructuring Advisers

By Matthew DiLallo - Mar 17, 2020 at 10:19AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The debt-laden oil and gas producer is exploring options.

Chesapeake Energy (CHKA.Q) has reportedly hired debt restructuring advisors to help it address its balance sheet following a historic crash in crude oil prices. According to a report by Reuters, Chesapeake hired restructuring lawyers at Kirkland & Ellis LLP and investment bankers at Rothchild & Co that specialize in reworking debt. The company is reportedly studying its options. 

Chesapeake Energy entered this year with $8.92 billion in debt, an increase from $8.17 billion at the end of 2018 due to the acquisition of Wildhorse Resource Development. It did, however, take several steps last year to improve its financial situation, including eliminating $900 million in debt during the fourth quarter through several exchange transactions. 

Oil pumps with a red sky in the background.

Image source: Getty Images.

Those moves also pushed out most of the company's upcoming debt maturities. However, it still had $302 million in debt maturing this year. Chesapeake initially planned to sell between $300 million and $500 million in non-core assets this year to pay off that debt. However, with oil prices collapsing, it has upended asset values, which will make it much harder to achieve that target. 

Chesapeake does have $1.35 billion of borrowing capacity remaining on its $3 billion credit facility to address its 2020 debt maturities. However, while its lenders reaffirmed that facility last November, they'll likely reduce borrowing capacity at the next redetermination, given how far crude prices have fallen since that time. 

Chesapeake has struggled under the weight of its hefty debt load over the last several years. While it has taken many small steps to eliminate some debt while pushing out other maturities, it still has a significant hill to climb. Because of that, it might have no choice but to restructure through bankruptcy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
334%
 
S&P 500 Returns
117%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.