US firm Chesapeake Energy to file for bankruptcy

US-based petroleum and natural gas company Chesapeake Energy is reportedly preparing to file for bankruptcy this week amid the Covid-19 crisis, according to people familiar with the matter.

The novel coronavirus has created unprecedented disruption across the world, which has resulted in historically low and volatile prices.

According to a Reuters report, the company is currently in the final stages of negotiation to procure a $900m debtor-in-possession loan, which will help the company to manage operations when it is under administration.

Chesapeake and its major creditor Franklin Resources declined to comment on the issue. Franklin is among the company’s most significant creditors, holding major portions of its debt.

Last week, shares of Chesapeake Energy plummeted nearly 66% after a Bloomberg report said that the shale oil and gas producer is planning to file for bankruptcy.

The company was struggling with high debt even before the Covid-19 crisis broke.

In February last year, Chesapeake Energy completed the previously announced $3.97bn acquisition of the WildHorse Resource Development, following shareholder approval.

In July 2018, Chesapeake Energy signed a $2bn agreement to divest its Utica Shale acreage in Ohio, US, to oil and gas firm Encino Acquisition Partners to repay debts.

In January 2018, the company planned to axe 400 jobs, or around 13% of its workforce, as part of its efforts to cut down costs.