Natural gas and oil prices have both decreased over 30% compared to prices last year, leaving oil and gas producers in a precarious financial position, according to the Wall Street Journal.
Chesapeake Energy was once the second-largest gas producer in the U.S. The company has access to almost 15 million acres available for drilling. However, after a boom in drilling for natural gas, other companies soon found a more lucrative alternative, tapping shale formations searching for oil. Chesapeake did not transition to producing oil as quickly as other companies.
“They were at the forefront, and they were the most aggressive. But because of how aggressive they were, it left them unable to pivot to what ended up being the real moneymaker,” said Chris Duncan, a Brandes Investment Partners director.
At the time of filing for bankruptcy, Chesapeake reported assets of $16.2 billion and $11.8 billion in debt. Their situation is not unlike other oil and gas producers. There has been decreased access to capital as lenders see the high risk due to falling prices, leading to more companies declaring bankruptcy.