Horizontal hydraulic fracturing pioneer Chesapeake Energy filed for Chapter 11 bankruptcy to eliminate $7 billion in debt, and others could follow soon, Alexandra Scraggs reports for Barron's.
Lower demand during the pandemic triggered an oil crash that's hitting the fracking industry hard. The U.S. became a top oil producer recently because of the fracking boom, but keeping up with that boom means most fracking companies are heavily leveraged and can't afford a downturn.
But bond yields for Chesapeake have been distressed since August 2019, long before the pandemic, Scraggs reports. She lists 10 other oil and gas companies that could also declare bankruptcy, including drilling equipment maker Forum Energy Technologies.
According to a Deloitte study, one-third of U.S. shale-oil producers are "technically insolvent," with crude oil prices so low, meaning they will have trouble repaying debts. Oil prices have gone up a bit since April, "but the rebound will do little to prevent 15 years of debt-fueled production growth catching up with many shale producers," Kevin Crowley reports for Bloomberg.
Lower demand during the pandemic triggered an oil crash that's hitting the fracking industry hard. The U.S. became a top oil producer recently because of the fracking boom, but keeping up with that boom means most fracking companies are heavily leveraged and can't afford a downturn.
But bond yields for Chesapeake have been distressed since August 2019, long before the pandemic, Scraggs reports. She lists 10 other oil and gas companies that could also declare bankruptcy, including drilling equipment maker Forum Energy Technologies.
According to a Deloitte study, one-third of U.S. shale-oil producers are "technically insolvent," with crude oil prices so low, meaning they will have trouble repaying debts. Oil prices have gone up a bit since April, "but the rebound will do little to prevent 15 years of debt-fueled production growth catching up with many shale producers," Kevin Crowley reports for Bloomberg.
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