Chaparral Energy (CHAP) became the U.S. energy sector’s latest coronavirus pandemic casualty, filing for bankruptcy protection as Covid-19 continues to slam the global economy and oil demand along with it.
The company filed for Chapter 11 in U.S. Bankruptcy Court in Delaware - its second round of bankruptcy protection in four years - paving the way for bondholders to take control of the Oklahoma driller in the aftermath of sluggish oil prices.
“While we have taken carefully measured and decisive action to address the challenges of 2020, the overall impact to the energy industry, including Chaparral, has been severe,” CEO Chuck Duginski said in a statement.
Indeed, the Covid-19 pandemic has led to a surge in energy industry bankruptcies, as lockdowns have pummeled demand and spurred lenders to cut credit lines to producers. A price war between Russia and Saudi Arabia that briefly pushed oil-price futures below zero has also hit the industry hard.
So far in 2020, the bankruptcy tally has included California Resources (CRC) , the state’s largest crude producer, which filed for creditor protection last month, and shale gas driller Chesapeake Energy (CHK) .
Chaparral's assets and liabilities were in the range of $500 million to $1 billion, according to the court filing. It had around $421 million of debt outstanding at the end of 2019. Some $32 million in cash reserves will allow it to maintain operations through the restructuring.
Lenders have been reining in credit for shale drillers and Chaparral’s borrowing limit was recently reduced to $175 million from $325 million. Reuters reported in March Chaparral was working with debt restructuring advisers to shore up its cash position.
The Oklahoma City-based oil and gas producer operates in the Anadarko Basin. It previously filed for bankruptcy protection in 2016, following a plunge in crude prices that started in 2014.
In a separate filing on Sunday, Chaparral’s debtors said they have started the Chapter 11 cases to implement a “prepackaged plan of reorganization.”
Shares of Chaparral were trading at 39 cents on the New York Stock Exchange on Monday.