Chesapeake Struggle With Low Gas Prices

Chesapeake Struggle With Low Gas Prices

Chesapeake Energy is warning it might not be able to sustain low fuel prices in the long term. The once thriving company is now on the blink of collapsing.

It is reflecting the growing pain across the energy commodity. The Oklahoma-based company shares, and bond tumbled after the company statement of not being viable as a “going concern” if low oil and natural gas prices persist. The warning came after the company posted a greater than expected loss for the third quarter.

A decade ago, the company was a $37.5 billion company that was led by Aubrey McClendon, an outspoken advocate for the gas industry. Chesapeake became the second largest U.S. producer of the fuel. By 2016 McClendon was indicted by a federal grand jury on charges of conspiring to rig bids for the purchase of oil and gas leases. A day later, he was dead after his car collided with a highway overpass.

The Company is currently value at $2.6 billion. The decline of the company has been the victim of its own success in cracking open shale-rock formations for access to additional supplies.

The company has been selling their assets since McClendon’s passing, cutting jobs and trying to produce more oil in effort to chip away the mountain of debts. Its notice came as shale producers struggle to prove to the investors the company can produce positive cash flow.

The going-concern warning signals that Chief Executive Officer Doug Lawler’s six-year campaign to rescue Chesapeake from the billions of dollars in debts amassed by McClendon may be on the verge of failure. Lawler, who was hand-picked for the job by activist investor Carl Icahn, long sought to convert the gas giant into an oil company, to no avail.

Chesapeake has already taken some steps to cut debt. In September, the company announced a $588 million debt-for-equity swap. In an earnings statement earlier Tuesday, Chesapeake said it had restructured gas gathering and crude transportation contracts in South Texas and the Brazos Valley to improve future returns.