Chesapeake Energy’s Slim Chance to Avoid Bankruptcy
We’ve recently brought you a number of stories about Chesapeake Energy and their falling stock price (see Chesapeake’s Reverse Stock Split Bombs, Company “On Life Support” and Chesapeake Suspends Dividend Payments; Stock Still Falling). Most analysts believe that with $9 billion in debt and a stock value approaching $0, the company will have to declare bankruptcy. Soon. But not everyone sees it that way. We spotted one analyst who says Chessy still has a fighting chance to stay out of bankruptcy, if…
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With yesterday’s historic crash in the price of West Texas Intermediate (WTI) oil comes a big boost in the stock price for a number of Marcellus/Utica drillers. As we’ve outlined multiple times, but will repeat here again, stock traders believe that with the crash in oil prices and U.S. shale oil drillers laying down rigs faster than we can count, the high volume of “associated gas” coming from the oilfields will vastly decrease. That means less supply in the market. With less supply and the same (or increasing) demand comes higher prices for natgas. And higher prices for natgas means more profits and likely more new drilling for Marcellus/Utica drillers. Hence, investors are snapping up stocks for M-U drilling companies.
Before the COVID-19 coronavirus pandemic hit, causing lockdowns and stay-at-home orders throughout much of the U.S. (and world), natural gas drillers in places like the Marcellus/Utica were hurting (due to low gas prices) but holding their own financially. Maybe not all, but a majority were doing OK. And then the bottom dropped out of everything with the virus causing demand “destruction” because people are not traveling. Right now there’s less of everything–less electricity being used (a major customer for natgas), less natgas used for heating big office buildings and factories, etc. Of course, that means less production, with shale gas drillers choosing to scale back new drilling and even shut-in some wells.
On Friday Chesapeake Energy announced it has suspended payment of dividends on each series of its outstanding convertible preferred stock effective immediately. The company also made the point that suspending this type of dividend does not constitute a default (failure to pay) under any of the company’s debt instruments. The suspension comes just a few days after the company completed a reverse stock split, combining 200 shares of old stock into 1 share of new stock (see 
Yesterday we told you that Chesapeake Energy’s reverse stock split (effective on Wednesday) of combining 200 shares into a single new share didn’t work out so well initially (see 
Chesapeake Energy pulled the trigger on a reverse stock split after the close of trading on Tuesday, combining 200 shares into one single new share (see 
As cases of COVID-19 coronavirus began to climb in relatively rural Beaver County, PA, local politicians pressured Shell to stop work on the mighty ethane cracker plant facility they are building in Monaca. Shell quickly complied, sending nearly 8,000 workers home in mid-March for what was thought to be “a few days to a few weeks” (see 
Back in December MDN told you that Thailand’s Banpu, which has invested $500 million so far in the Pennsylvania Marcellus, had developed a wandering eye and cut a deal to buy Devon Energy’s Barnett Shale assets in Texas for $770 million (see 
The Pennsylvania Dept. of Environmental Protection (DEP) has reached an agreement with Range Resources that forces Range to pay $198,920 in fines for violations of state regulations and the Air Pollution Control Act–violations that happened in 2013, 2014, and 2015. Our reading is that most of the violations revolve around Range not filing the right paperwork.
Diversified Gas & Oil (DGO) owns close to 8 million acres of leases with some 60,000 (mostly) conventional oil and gas wells. Their focus has been to acquire quality production and cash flow–regardless of the well or commodity type (gas or oil)–in the Appalachian Basin. They currently have over 400 Marcellus/Utica shale wells in their portfolio too. DGO announced it has a conditional deal to buy another 6,500 conventional wells spread across West Virginia, Kentucky and Tennessee, along with a 4,700-mile gathering pipeline system located in WV. The deal, “subject to ongoing due diligence,” is for $110 million.
The deed is done as of 5 pm today. Chesapeake Energy, with a stock price bumping around close to $0 (15 cents per share when we checked this morning), is doing a reverse stock split where the company will combine 200 shares of outstanding stock into a single share. The move is aimed at boosting the per-share price and preventing the company’s stock from being delisted from the New York Stock Exchange. Chesapeake recently hired “restructuring advisers” to help it navigate a looming debt default (see 
In mid-March, MDN brought you the news that Chesapeake Energy had hired “restructuring advisers” to help the company navigate a $9 billion debt millstone hanging around its neck (see 
EQT and U.S. Well Services (USWS) have signed a deal for USWS to provide electric fracking for one-third of EQT’s completions operations over the next three years. Does USWS (and e-fracking) sound familiar? It should! Range Resources signed with USWS in January (see