Pipeline Operator Sues Chesapeake Energy Over Payment Dispute
Pipeline operator Glass Mountain LLC is suing troubled oil and gas producer Chesapeake Energy Corp for allegedly defaulting on an oil transportation contract that had been renegotiated weeks earlier.
Chesapeake, a shale gas pioneer, borrowed aggressively to buy and drill properties and began losing money as gas prices plummeted. U.S. natural gas futures traded at $1.73 per million British thermal units (mmBtu) on Monday, down from more than $13 in 2008.
The suit, filed in Oklahoma state court on April 3, seeks $48.8 million and expenses for breach of contract.
A spokesman for Chesapeake did not respond to requests for comment.
Chesapeake Energy last month tapped debt restructuring advisers Kirkland & Ellis LLP and Rothschild & Co to help it deal with creditors amid an unprecedented drop in oil demand and plummeting prices for its output.
In January, Chesapeake cut debt by $900 million, and a month later reported about $1.4 billion in cash and borrowing ability to address looming debt maturities. The company had about $9 billion in debt at the end of 2019.
Chesapeake shares traded at 16 cents apiece on Monday, down from $2.91 a year earlier. Shareholders on Monday approved a reverse stock-split to prevent a de-listing on the New York Stock Exchange.
The Chesapeake board voted to swap one share for every 200 shares, effective 5 p.m. Tuesday, reducing the shares outstanding to 9.784 million, from 1.957 billion on April 10. It also voted to cut total authorized shares to 22.5 million from 3 billion previously, the company said in a statement.
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