Chesapeake Energy (OTC:CHKA.Q) is preparing to file for bankruptcy within the next week, according to a report by Reuters. The company could file as soon as Thursday, though it's negotiating with creditors, which could push the timing into next week.

According to the report, Chesapeake is putting the finishing touches on about $900 million of debtor-in-possession financing, which will support its operations during the bankruptcy process. The company is in talks with other creditors to "roll-up" some of its existing debt into that package, which could bring the total to around $2 billion.

An oil pump with a red moon above it.

Image source: Getty Images.

The company is also working with creditors on a plan that would eliminate a substantial portion of its burdensome $9 billion debt load in exchange for an equity infusion. Those creditors, which include Franklin Resources (NYSE:BEN), would take control of the company in exchange for eliminating more than $7 billion of debt, according to the current plan that's still under negotiation. Franklin Resources hired a law firm to assist it in negotiating with Chesapeake earlier this year to help it preserve as much of its investment as possible.

Depending on the outcome of these negotiations, Chesapeake Energy will likely transfer a substantial portion -- if not all -- of its equity to creditors like Franklin Resources. That would either significantly dilute or completely wipe out its existing shareholders, leaving them without much likelihood of recovery even if oil prices stage a significant future rebound.