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Chesapeake Energy Corp. discarded its full-year outlook and revived concerns it may fail, hiring advisers to evaluate strategic alternatives that could include restructuring.
The Oklahoma City driller may consider Chapter 11 bankruptcy reorganization as result of industry conditions, the company said Monday in a federal filing. It said in a separate statement it was withdrawing 2020 guidance issued in February, when the company called for a 30 per cent cut to its spending budget while targeting free cash flow for the year.
Chesapeake was already in a precarious position before the COVID-19 outbreak sent crude demand plummeting. At its height more than a decade ago, the producer was a US$37.5 billion company led by Aubrey McClendon, an outspoken advocate for the gas industry. But Chesapeake’s success at extracting the fuel from deeply buried rock contributed to a massive gas glut. While the company has pushed to transition into an oil explorer, that move could prove pointless after crude’s historic crash.
The company first warned in November that it may not survive as a going concern. Shares fell 3.4 per cent to US$14.20 in pre-market trading in New York.
Chesapeake said in the federal filing that by delaying and shutting in wells, the company is cutting oil output by 50 per cent this month and by 37 pre cent in June. The company also cut 13 per cent of its workforce in April.
Bloomberg.com
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