In this April 23, 2010, file photo, workers move a section of well casing into place at a Chesapeake Energy natural gas well site near Burlington, Pa., in Bradford County. Chesapeake Energy, a shale drilling pioneer that helped to turn the United States into a global energy powerhouse, has filed for bankruptcy protection. The Oklahoma City-based company said Sunday, June 28, 2020, that it was a necessary decision given its debt. Its debt load is currently nearing $9 billion. (AP Photo/Ralph Wilson, File)
NEW YORK (AP) — Chesapeake Energy, a shale drilling pioneer that helped to turn the United States into a global energy powerhouse, has filed for bankruptcy protection.
The Oklahoma City-based company said Sunday that it was a necessary decision given its debt. Its debt load is currently nearing $9 billion. It has entered a plan with lenders to cut $7 billion of its debt and said it will continue to operate as usual during the bankruptcy process.
The oil and gas company was a leader in the fracking boom, using unconventional techniques to extract oil and gas from the ground, a method that has come under scrutiny because of its environmental impact.
Other wildcatters followed in Chesapeake’s path, racking up huge debts to find oil and gas in fields spanning New Mexico, Texas, the Dakotas and Pennsylvania. A reckoning is now coming due with those massive debts needing to be serviced by Chesapeake and those that followed its path.
More than 200 oil producers have filed for bankruptcy protection in the past five years, a trend that’s expected to continue as a global pandemic saps demand for energy and depresses prices further.
Founded in 1989 with an initial $50,000 investment, Chesapeake focused on drilling in underdeveloped areas of Oklahoma and Texas. It largely abandoned traditional vertical well drilling, employing instead lateral drilling techniques to free natural gas from unconventional shale formations.
It became a colossus in the energy markets, eventually reaching a market valuation of more than $37 billion. Then, the first in a series of financial shocks hit Chesapeake as the Great Recession sent energy prices into the basement.
The company closed Friday valued at around $115 million.
Chesapeake grew with lightning speed under one-time CEO Aubrey McClendon, known for his aggressiveness acquiring oil and gas drilling rights. He pushed the company to acquire enormous tracks of land in several states, taking on mounting debt along the way. Chesapeake in some ways became a victim of its own success as other companies followed its lead and U.S. energy production soared, driving down prices.
As Chesapeake was expanding at breakneck speed, natural gas prices were near $20 per million British thermal units, the benchmark for natural gas trading. But frackers like Chesapeake flooded the market with cheap natural gas, sending prices to well under $2.
McClendon left the company in 2013 with questions swirling about its business practices. On March 1, 2016, McClendon was indicted on a charge of conspiring to rig bids on energy leases in Oklahoma. McClendon died the following day, the single occupant in his Chevrolet Tahoe that smashed into a concrete viaduct at nearly 90 mph.
The coroner ruled his death an accident.
Chesapeake has paid millions of dollars since to settle charges of bid rigging.
Robert Lawler became CEO after McClendon’s death and began selling off assets to get Chesapeake’s debt under control. But that debt grew more threatening within two years as the fracking boom turn to a bust in 2015. Chesapeake reported a quarterly loss of $4 billion that year and the first wave of layoffs began with 750 jobs.
Despite Chespeake’s problems, Lawler last year remained the highest-paid CEO in Oklahoma with $15.4 million in compensation, according to a ranking compiled by The Associated Press and Equilar.
Chesapeake lost an eye-popping $8.3 billion in the first quarter of this year, and it listed $8.62 billion in net debt. The company said in a regulatory filing in May that “management has concluded that there is substantial doubt about the company’s ability to continue as a going concern.”
___ This story has been corrected to show that Chesapeake went from vertical to lateral drilling, not horizontal drilling.
7 Stocks That Risk-Averse Investors Can Buy Now
If the title of this presentation piqued your interest, then you understand that there’s no such thing as risk-free investing. And that’s particularly true when you’re investing in stocks. The truth is sometimes the best thing that can happen is that your portfolio performs less badly than the market.
The goal of the risk-averse investor is not to avoid stocks, it’s to ensure that you retain the capital you gain, even if that means your portfolio does not grow as fast or as far as more aggressive stocks. You have to have a very low FOMO (fear of missing out) level.
With that in mind, there are still ways you can profit from this market without throwing caution to the wind. One is to look for stocks that have a low beta. Beta is a measure of a stock’s volatility in comparison to the rest of the market. A stock with a beta of 1, for example, means that investors can expect the price movement of the stock to be closely correlated to the market. A beta of more than 1 means the stock price will be more volatile (higher highs but lower lows).
What you’re looking for is a beta of less than 1. This means that the stock is less volatile than the broader market. While this may mean lower highs, it also generally means lower lows.
And many of these stocks are in defensive sectors. This means that their performance is consistent under both good and bad economic conditions.
View the "7 Stocks That Risk-Averse Investors Can Buy Now".