over 3 years ago • 2 mins
Chesapeake Energy is running on empty: the oil and gas firm filed for bankruptcy protection on Sunday ⛽️
The US oil company – now the biggest of recent collapses – was once ahead of the curve in US shale drilling, not to mention a big player in the natural gas market. But as the global economy succumbed to the effects of coronavirus, and as oil markets succumbed to the effects of the Saudi-Russian price war, the price of the murky nectar collapsed to record lows 📉 Falling energy prices make for lower profits in the oil and gas business, and Chesapeake – facing debts piled sky high from years of expansion – was overwhelmed. Unable to meet its obligations, it had little choice but to declare itself broke.
Chesapeake agreed to a plan that’d simultaneously see it slash about $7 billion in debt and raise an additional $900 million of emergency cash. But that still leaves some $2 billion of debt outstanding, when the company’s worth just $100 million. Having filed for bankruptcy protection, the company will likely restructure in order to repay its remaining creditors, even if only partially. Meanwhile, it might reignite the debate over whether US energy firms should be bailed out: the government was happy to cut checks for the airline industry – one of oil companies' biggest customers – after all 🤔
Another oil giant, BP, announced on Monday it’d agreed to sell its petrochemicals business to Luxembourg-based rival Ineos for $5 billion. Like its competitors, BP’s profits have been buffeted by weak energy prices. But the company sensed the winds changing a while ago: it promised it’d sell $15 billion worth of assets to help accelerate its shift towards green and renewable energy by 2021 – and it’s delivered on that commitment a year ahead of schedule.
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