Chesapeake Energy Corp. has weathered many economy-related challenges during its 31 years in existence. The latest one, however, may prove too great to overcome and deal a potentially awful blow to Oklahoma City.
In a filing with regulators, Chesapeake’s management announced that bankruptcy is an option after posting a net loss of roughly $8.3 billion for the first quarter of this year.
The oil and gas industry in North America has been waylaid by low prices resulting from reduced demand stemming from the COVID-19 pandemic and a price war between Russia and Saudi Arabia. During the quarter, Chesapeake said, it had to take a non-cash impairment charge of about $8.5 billion on its assets.
“Historically, oil and natural gas prices have been volatile; however, the volatility in the prices for these commodities has substantially increased as a result of COVID-19 and OPEC+ decisions,” the company said in its filing.
“We expect to see continued volatility in oil and natural gas prices for the foreseeable future, and such volatility, combined with the current depressed prices, has impacted and is expected to continue to adversely impact our business.”
Chesapeake began in 1989. During its first two decades, the company enjoyed tremendous growth and established itself as an outstanding corporate citizen through its support of numerous nonprofits and schools. However, its workforce eventually became unsustainable.
In 2013, amid demands for change by major shareholders, a new chairman and new CEO were named. Roughly 640 Oklahoma City employees (and about 900 companywide) were let go as Chesapeake’s new leadership worked to shore up the company’s viability.
In 2015, during a prolonged downturn in energy prices, Chesapeake laid off 740 employees, including 562 in Oklahoma City. More cuts came in 2018, with 400 employees let go, after a stretch in which Chesapeake had sold off more than $5.4 billion in assets.
Those cuts left Chesapeake with about 2,900 employees, 1,800 of those locally. Today the workforce totals roughly 1,900; at its largest, Chesapeake employed about 12,600.
Other than using bankruptcy to restructure its debt, Chesapeake says it is considering taking itself private. However, the company says there is no guarantee it will succeed in restructuring, improving its finances or completing strategic transactions.
“As a result of these uncertainties and the likelihood of a restructuring or reorganization,” the company said in its filing, “management has concluded that there is substantial doubt about the company’s ability to continue as a going concern.”
It’s a sobering assessment, for sure. Our best wishes go out to all the men and women employed there today, and all those who have helped make Chesapeake such a valuable piece of this city’s fabric for so long.
~ The Oklahoman