Chaparral Energy Raises Going Concern Doubts, Hires Advisors Amid Oil Rout

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(Reuters) – Oklahoma oil and gas producer Chaparral Energy Inc on Monday warned of its ability to continue operations amid historic falls in commodity prices and said it had hired advisers legal and financial.

A drop in economic activity due to the COVID-19 pandemic and a price war between major oil producers Russia and Saudi Arabia hurt oil prices, with U.S. crude falling about 60 % this year and falling below $0 for the first time in history last month.

Reuters reported in March that the company was working with debt restructuring advisers as it sought to shore up its cash position.

Oklahoma City-based Chaparral had about $421 million in outstanding debt at the end of 2019. It had about $22.6 million in cash and cash equivalents and $130 million drawn from its debt base. borrowing of $325 million, with no significant debt maturities until 2022.

Last month, Chapparal Energy announced it would award $2.15 million in retention bonuses to five senior executives, including chief executive Charles Duginski, in lieu of long-term stock awards.

The company had said Duginski would receive $725,000, the most among the group, if he stayed with the company for the next 12 months.

Retention rewards are incentives offered to executives by the company during crucial times and are seen as a red flag in the beleaguered energy industry.

If Chaparral files for bankruptcy, it would be the second time for the company, which went through the process when oil prices last crashed in 2014-16 and exited in March 2017.

Earlier today, shale pioneer Chesapeake Energy Corp said it was unable to access financing and was considering bankruptcy court restructuring of its more than $9 billion debt if oil prices were not recovering.

Chesapeake decided last week to prepay $25 million in executive incentives. Peers Whiting Petroleum Corp and Diamond Offshore Drilling Inc also handed out cash awards to senior management just days before filing for Chapter 11 protection last month.

Chaparral said bit.ly/3fIfMLV It began shutting down non-essential oil production on Monday and posted a first-quarter profit of $4.91 million, down from a loss of $103.5 million a year earlier.

Shares of the company rose 28% to 50 cents in extended trading.

Reporting by Arathy S Nair and Arunima Kumar in Bengaluru; Editing by Arun Koyyur

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