Update May 14th, 2020 – Chesapeake Energy Corp said it would prepay a total of $25 million in incentive compensation to 21 top executives to ensure they are motivated, even as it prepares to file for bankruptcy protection to tackle its nearly $9 billion debt pile.
The Oklahoma City-based company, co-founded by late wildcatter and outspoken natural gas proponent Aubrey McClendon, has been struggling with an unprecedented rout in oil and gas prices, as the coronavirus-driven economic downturn saps energy demand. Reuters reported last month that Chesapeake was in discussions to line up bankruptcy financing.
The move comes as investors are closely monitoring executive pay at struggling energy firms after Whiting Petroleum Corp and Diamond Offshore Drilling changed incentive programs for their senior management teams in the days before filing for Chapter 11 last month to award them cash sum.
CEO Doug Lawler spoke at the Scotia Howard Weil energy conference in New Orleans this week and says the company will not sell assets without getting good value, even as it tries to fix its debt-burdened balance sheet. “We’re not desperate to sell assets,” Lawler says. “We know we need to improve the balance sheet, but we don’t have to sell anything in the near term.”
Chesapeake has been working to trim its current debt load of $9.97B, which is more than 3x its market valuation.
The driller saw its debt burden balloon as it embarked on a massive spree of land buying under late founder and former Chief Executive Aubrey McClendon during the early days of the U.S. shale drilling boom.
Chesapeake, an early adopter of advanced drilling methods to free natural gas from shale rock, has been moving aggressively to reduce its debt since Lawler became CEO in 2013.
Chesapeake announced in February it had reached three separate deals to sell wells and leases in Oklahoma for a total of $500 million. The sales included Chesapeake’s remaining producing properties and acreage in northwest Oklahoma’s Mississippi Lime, as well as properties in central and western Oklahoma. The sales included 238,000 net acres and 3,000 wells producing about 23,000 barrels of oil equivalent net to Chesapeake.