Chesapeake says it has no plans of pursuing bankruptcy

OKLAHOMA CITY (AP) – Share prices for Chesapeake Energy stock were down more than 50 percent for a time Monday after a news report said the Oklahoma City-based company had brought on attorneys who help companies restructure their debt, but rebounded after the natural gas producer told investors that it was not planning to file for bankruptcy protection.

According to Chesapeake Energy, since 2010, Kirkland & Ellis LLP serves as one of its counsels and it continues to advise the company while seeking to strengthen its balance sheet further after its recent debt exchange. The rumors started on a report that Chesapeake had started working with restructuring law firm Kirkland & Ellis.

Chesapeake, which is the second-largest producer of natural gas in the country, has struggled as natural gas prices have declined.

Chesapeake’s share price plunged 50 percent on Monday, triggering three so-called circuit breakers, which halt trading when stock moves steeply in any direction. Chesapeake Energy announced that it has no plans to pursue bankruptcy in light of the $11.25 bln in debt on the balance sheet.

One would not think that Chesapeake Energy’s stock would crash so far and so fast.

About 40 energy companies entered bankruptcy in 2015 and more are expected in the next few months. Chesapeake and Halcon both suspended dividend payouts on preferred shares last month. Chesapeake reported cash and cash equivalents of approximately $1.8 billion on September 30, according to public filings.

However, Chesapeake, which is set to disclose 4Q2015 results on February 24, has an estimated $1.3 billion in debt that is maturing by the end of 2017, with prospects of a cash shortfall of more than $1 billion over the next two years. The average price of gas was around $2.56 per million British thermal units previous year.

In the third quarter of 2015, it reported a loss of $4.69 billion, compared with a profit of $169 million the same quarter the year before. The company was the worst performer Monday on the Standard & Poor’s 500 Index. Chesapeake’s notes due March 2016 were trading at 83 cents on the dollar, after earlier falling by a record to 74 cents.

S&P cut Chesapeake’s credit rating to “CCC+” due to “unsustainable” debt leverage.