Oklahoma City-based Chaparral became the U.S. energy sector’s latest coronavirus pandemic casualty on Sunday, filing for bankruptcy protection as Covid-19 continues to slam the global economy, and oil demand 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.
Lenders have been reining in on 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.