Chesapeake Says It Doesn't Plan to Pursue Bankruptcy -- Update
February 08 2016 - 1:30PM
Dow Jones News
By Timothy Puko and Erin Ailworth
Chesapeake Energy Corp. said Monday that it "has no plans to
pursue bankruptcy" after a report intensified such fears, cutting
its stock in half in early trading.
The report also sent shares of another stressed energy firm,
Williams Cos., and other pipeline companies tumbling, the latest
tremors from a world-wide collapse in energy prices and comes from
a company that was a pioneer of the U.S. oil-and-gas boom.
A Debtwire report said Chesapeake retained Kirkland & Ellis
LLP to help with debt and restructuring. Chesapeake responded by
issuing a statement saying it "has no plans to pursue bankruptcy."
It said Kirkland & Ellis has been working with the company
since 2010 and "continues to advise the company as it seeks to
further strengthen its balance sheet following its recent debt
exchange." A Chesapeake spokesman declined to elaborate
further.
Shares of Chesapeake dropped by more than half but recovered
some ground following the company's statement and were down 37% in
midday trading in New York.
The Wall Street Journal reported in December that Chesapeake was
working with restructuring advisers at Evercore Partners Inc. to
shore up its balance sheet as commodity prices extend their
decline, citing people familiar with the matter. The Evercore
bankers are advising the natural-gas producer on potential measures
to reduce its $11.6 billion debt load, such as exchanging existing
bonds at a discount for new securities or selling assets, the
people said.
Once a Wall Street darling, Chesapeake has struggled under a
heavy debt load incurred to finance oil and gas purchases made
under the direction of Chesapeake's founder and former head Aubrey
McClendon. Activist shareholders forced out Mr. McClendon in 2013
and installed a new chief executive, Doug Lawler, who has been
trying to right the ship even as natural-gas and crude-oil prices
remain low. The company has posted a string of quarterly
losses.
Chesapeake's woes rippled to pipeline companies Williams and
Energy Transfer Equity LP, which are trying to merge. Last year,
Chesapeake reworked some expensive natural-gas transportation
contracts it had with Williams, and had been hoping to renegotiate
others.
About a fifth of the revenue at Williams comes from processing
and shipping the gas and oil Chesapeake produces, according to
Fitch Ratings, which downgraded the ratings of both companies in
the past two months. Williams shares were down 26% in midday
trading, while Energy Transfer Equity lost 32%.
Williams declined to comment.
Several other energy companies with big pipeline operations have
also taken sharp losses Monday. ONEOK Inc., Kinder Morgan Inc. and
Marathon Petroleum Corp. were down at least 5%.
Monday's big swing is the latest in a series of dramatic moves
across markets--many, but not all tied to the shakeout from falling
energy prices. LinkedIn's shares tumbled 44% on Friday, leading a
sharp dive in technology shares that helped sink the Dow Jones
Industrial Average 211.61 points, or 1.3%, in one session.
Write to Timothy Puko at tim.puko@wsj.com and Erin Ailworth at
Erin.Ailworth@wsj.com
(END) Dow Jones Newswires
February 08, 2016 13:15 ET (18:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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