SEC Report: Chesapeake May Not Survive Possible Bankruptcy

Tuesday, May 12th 2020, 5:25 pm
By: Storme Jones

Federal financial disclosures reveal more information about a possible bankruptcy at one of Oklahoma’s largest oil and gas companies.

In a recent SEC filing, Chesapeake Energy Corporation publicly confirmed for the first time it is considering financial remedies including Chapter 11 bankruptcy. The report also indicated the company may not survive through the bankruptcy process.

“However, there can be no assurances that the company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions,” the report said.

“I think it's a prudent strategic initiative by management at Chesapeake,” OCU Meinders School of Business Dean and economist Steven Agee said. "I think they're doing what they need to do.”

Agee said the company has hired outside counsel to guide them through the restructuring process.

The company also announced in filings, top executives will receive expedited cash bonuses totaling $25 million to boost morale during the financial uncertainty.

Executives have taken a reduction in incentive pay, however, the move makes the anticipated cash bonuses immediate. Agee said the move helps provide stability in leadership positions during the uncertain time.

“They need to retain employees in those key positions,” Agee said. “When all the dust settles and they figure out how they're going to restructure and the bankruptcy court approves the restructuring, then they're going to have an ongoing concern to go forward.”

In a letter to employees obtained by News 9, Chesapeake CEO Doug Lawler discusses a possible Chapter 11 filing saying in part “…if that were to happen, we would continue to operate our business as usual, and you would continue to be paid and receive benefits."

As of the end of 2019, the company employed approximately 2,300 people. 

Agee said the company was heading in a positive direction under Lawler, reducing its debt from $21 billion to around $9 billion, until a fight between Saudi Arabia and Russia increased supply and COVID-19 dropped demand.

“These shocks that they've seen recently are completely outside of their control,” Agee said. “Something you just don't see coming and it's difficult to plan for. I think what they're doing is the prudent thing.”

Chesapeake Energy stock prices have fell by more than 90% in 2020.