Chesapeake Energy, the Oklahoma company that spearheaded the U.S. shale oil revolution, filed for Chapter 11 bankruptcy protection on 28 June.
The company had signaled in May that it probably would be unable to meet its debt payments.
The bankruptcy will erase $7 billion in debt. Chesapeake will reorganize and secure $2.5 billion in new debt financing from some of its current creditors. Franklin Resources and Fidelity Investments, two of the current creditors, will emerge as major equity owners when the bankruptcy is completed.
The company will continue operations, at present with a few gas well drilling rigs and no oil rigs.
Chesapeake rode the credit of the shale oil wave, at one time working 175 rigs across Louisiana, Ohio, Pennsylvania, and Texas.
It funded its rapid expansion through debt, spending $30 billion more than it made from 2010 through 2012. By 2016, the company was carrying more debt than Exxon and Chevron combined. The company has been essentially unprofitable since then.
When oil prices collapsed precipitously this year under the combined weight of a global oil glut and economic shutdown, Chesapeake had no cash flow to service its debt.
Whiting Petroleum, another leader in the U.S. shale oil play, filed for bankruptcy on 1 April.
