Chesapeake Denies it’s Headed to Bankruptcy While Shares Plummet

Shares of Chesapeake Energy Corp. crashed on Monday in the wake of news accounts that the Oklahoma City energy company had hired consultants to assist with restructuring the firm’s $10 billion in debt. At the same time, Chesapeake denied it was headed to federal bankruptcy court.

Chesapeake’s shares were down 42 percent at one point Monday morning after Reuters and the trade publication Debtwire reported that Chesapeake had hired lawyers from the firm Kirkland and Ellis to help with the restructuring process. The plummet in values forced Chesapeake to issue a statement, confirming it had hired lawyers but they had been on retainer for the past several years.

“Chesapeake Energy Corporation stated today that Kirkland and Ellis LLP has served as one of Chesapeake’s counsel since 2010 and continues to advise the company as it seeks to further strengthen its balance sheet following its recent debt exchange,” read the statement. “Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders.”

The company’s stock hit a new 52-week low of $1.50 following the published accounts.

The New York Times reported the published claims only heightened worries among investors that Chesapeake was going to file Chapter 11 bankruptcy protection as the company, like many others nationwide, struggles with low oil and natural gas prices. Chesapeake has exchanged nearly $4 billion of its bonds into new debt. Following Chesapeake’s announcement and denial that it was headed to bankruptcy, shares rose slightly, trading at $2.01 as of midday.

Still, as the Times indicated, analysts remain pessimistic about the fortunes of the company. The $10 billion debt was reported as of Sept. 30 and compared to the $1.8 billion in cash on hand. But Chesapeake reported losing $4.7 billion in the most recent quarter.

More financial details of the company will be made known later in the month when Chesapeake releases its 2015 fourth quarter and year-end operational update and financial results on Feb. 24, 2016. The information will be released before the market open on that Wednesday and details will be discussed during an 8 a.m. (CST) conference call.