US Chesapeake Exits Bankruptcy
US shale producer Chesapeake has exited Chapter 11 bankruptcy, the company said on February 9, announcing that its 2021 activity would focus on "world-class natural gas assets."
Chesapeake filed for Chapter 11 in June last year, becoming the largest US shale oil and gas producer to seek bankruptcy protection in recent years. Under a court-approved plan, $7.8bn of debt has been equitised, and the company's preferred and common equity interests have been cancelled as of February 9. Its new common shares will be listed on the Nasdaq exchange, with trading commencing on February 10.
Chesapeake's outstanding debt is $1.27bn, versus $9.1bn at the end of June last year. It has a $2.5bn credit facility, and on February 5, it issued $1bn in senior unsecured notes with a weighted average coupon of less than 5.7%, replacing the first lien last out term loan it had negotiated as part of its Chapter 11 filing.
"Today marks a new day for Chesapeake," CEO Doug Lawler said. "We have fundamentally reset our business, and with an improved capital and cost structure, disciplined approach to capital reinvestment, diverse asset base and talented employees, we are poised to deliver sustainable free cash flow for years to come."
A new board of directors has also been appointed, comprising chairman Michael Wichterich, Timothy Duncan, Benjamin Duster, Sarah Emerson, Matthew Gallagher, Brian Steck and Doug Lawler. The board is setting up the company's first environmental and social governance (ESG) committee.
ESG ratings are a growing concern for investors. Chesapeake has pledged to become net-zero in direct greenhouse gas (GHG) emissions by 2035; to eliminate routine flaring on new completions immediately; and to significantly reduce methane and GHG emission intensity by 2025, Lawler said.
The company expects to generate over $2bn of free cash flow over the next five years, and is targeting a long-term net debt to Ebitdax ratio of under 1.0. The company intends to reinvest 60-70% of cash flow, with its capital spending plan for 2021 including the operation of six rigs and two stimulation crews. It aims to eliminate $1bn in annual cash flows permanently from 2019 levels.
Chesapeake expects to produce 427,000 barrels of oil equivalent/day in 2021, versus 435,000 boe/d in Q4 2020.