Page 11 - NorthAmOil Week 26

NorthAmOil COMMENTARY NorthAmOil

Bankruptcies highlight

turnaround in shale fortunes

Chesapeake Energy’s much-anticipated bankruptcy filing has been

announced, with two more shale drillers also filing for bankruptcy

protection in the past week

US THREE shale drillers – Chesapeake Energy, Lilis becoming the second-largest natural gas pro-
Energy and Sable Permian Resources – have ducer in the US behind only ExxonMobil.
WHAT: filed for Chapter 11 bankruptcy protection in “Chesapeake showed the market – and its
Shale drillers Chesapeake recent days, having been hit hard by the collapse competitors – how quickly production could
Energy, Lilis Energy and in crude prices. Filing under Chapter 11 of the grow, how fast projects could develop, and
Sable Permian Resources US Bankruptcy Code allows companies to reor- what the updated US model for engaging with
have filed for bankruptcy ganise their debt and continue operating. And stakeholders looked like,” commented a Wood
protection. indeed, the ability to restructure may come as a Mackenzie principal upstream analyst, Alex
relief in an increasingly challenging operating Beeker. “Remember they brought international
WHY: environment for shale producers. upstream investors back to US onshore.”
The companies were In Chesapeake’s case, the high-profile filing However, as it built up its shale gas portfolio,
hit hard by the oil has long been awaited, with analysts predict- Chesapeake also racked up billions of dollars’
price downturn, with ing that the company would enter bankruptcy worth of debt and became embroiled in several
Chesapeake also proceedings since the oil price crash in March. scandals that led to the late former CEO, Aubrey
struggling with debt prior The company was also struggling prior to that McClendon, stepping down in 2013. Mean-
to that. to pay down its debt – valued at $9.5bn at the while, as booming shale gas production resulted
end of 2019. in crashing natural gas prices, oil began to look
WHAT NEXT: It is hard to overstate the impact that Chesa- like a more attractive proposition.
The bankruptcies come peake had on launching and shaping the shale The company has since been trying to pay
as the era of high revolution. Its bankruptcy is therefore being down its debt under the leadership of CEO
borrowing and spending viewed by some as being particularly sym- Doug Lawler, who also tried to pivot the firm
in shale plays appears to bolic, signifying a turning point away from the towards oil production. Initially the firm made
be well and truly over. approach that Chesapeake and its peers adopted some headway in its debt-reduction efforts
in the early days of the shale boom. by shedding tens of billions of dollars’ worth
of assets. But the move towards liquids pro-
Shale pioneer duction ultimately proved ill-timed, with two
Chesapeake made a name for itself as one of collapses in oil prices since 2014 slowing Ches-
the pioneers of the shale gas revolution, also apeake’s debt-reduction efforts and affecting the

Chesapeake made a
name for itself as a
shale gas pioneer under
the late former CEO,
Aubrey McClendon.

Week 26 02•July•2020 www. NEWSBASE .com P11