Chesapeake Energy Corporation, the second-largest producer of natural gas in the United States, is considering to file for bankruptcy as early as this week, becoming one of the biggest energy-producing company to unravel after the deadly coronavirus outbreak slammed the brakes on the global economy and hurt energy prices this year.
The Oklahoma City-based company, which ranked 309 on the Fortune 500 list last year, failed to make an interest payment of nearly $10 million on debt due on June 15. Another interest payment obligation is due on July 1, according to a report from Reuters.
People familiar with the matter said, Chesapeake, which employs 2,350 people, is nearing a bankruptcy filing and negotiating the financing is in final stages of around $1 billion debtor-in-possession loan.
The company is in constant talks with creditors to roll some of its loans and add it as a part of the company’s bankruptcy loan. That will help bring the total debtor-in-possession to around $2 billion. The company has a massive debt of around $9 billion on its balance sheet.
Last year, Chesapeake, reworked its bank sheet and pushed out the average maturity on some debt, and intended to pivot toward oil production and away from gas.
However, the price war between Russia and Saudi Arabia and the deadly coronavirus outbreak hobbled the global economy and massively affected jet fuel demand as airlines grounded flights amid global travel restrictions to curb the spread of the virus, which altered the company’s original business plan.
According to one of the sources, Chesapeake would attempt to work out a capital infusion from its creditors to be able to successfully emerge from bankruptcy and will file for liquidation latest by Thursday, only after a final talk with its creditors, although talks could delay until next week based on the success of the negotiation.
Last month, Chesapeake alerted that it may seek relief from some or all of their debts as recent events cast significant doubt on the entity’s ability to continue as a going concern.
Post the news, shares of Chesapeake Energy Corporation dipped -1.87% to $18.87 from the previous day. From an all-time high of $13,964 seen during the global financial crisis, Chesapeake’s share price has fallen massively to a two-digit number. The stock price is still down about 90% so far this year.
According to Tipranks, six analysts forecast the average price in 12 months at $16.50 with a high of $50.00 and a low of $1.00. The average price target represents a -12.56% decrease from the last price of $18.87.
The earning per share of Chesapeake is predicted to fall -87.97% by the end of this year and -151.19 by end-2021, according to Raymond James.
It is good to sell at the current level as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong sell opportunity; target 15 in the near-term with a stop loss of around 25.