Chesapeake Energy Corp.’s value has soared since its June bankruptcy filing, the U.S. judge overseeing the natural gas producer’s trial indicated, and is worth $5.13 billion, far above the shale gas pioneer’s estimate.
Chesapeake sought protection from creditors, weighed down by $11.8 billion in debt, after a decade of aggressive borrowing to buy oil and gas properties. Its losses ballooned last year as the coronavirus pandemic cut energy prices, leaving it unable to pay interest on its debt.
The Oklahoma energy producer filed a reorganization plan that initially cited a $3.25 billion enterprise value and later raised its estimate to between $3.5 billion and $4.7 billion.
Unsecured creditors have argued rebounding energy prices and recent oil and gas mergers put its value at up to $7.1 billion, an amount that would sharply increase their recovery.
“I’ve rejected everyone’s valuation models,” Judge David Jones told the court late Jan. 8 following days of expert testimony.
“I’ve worked really hard on my number and it’s a number I’ll live with,” Jones said at the end of the hearing.
Creditors did not react to his $5.129 billion valuation, according to recording of the testimony posted on the court website.
An attorney for unsecured creditors declined immediate comment.
Chesapeake was not available for immediate comment.
Oil prices are up 39% and U.S. natural gas futures up 56% since June 15, when Chesapeake skipped an interest payment on debt just ahead of its filing.
The trial is scheduled to resume this week with a potential ruling on the plan to follow. Unsecured creditors opposed to the plan have argued Chesapeake delayed its filing to make it more difficult to challenge debt held by some large creditors.
Management’s plan would turn over control of the company to holders of its first-lien, last-out term loan and second-lien notes, mostly held by mutual fund giant Franklin Resources Inc.