Share and debt prices of the United States' second-biggest natural gas producer Chesapeake Energy Corp (NYSE:CHK) dropped to their lowest in over a decade on Monday after the company side-stepped confirming it had hired restructuring attorneys.
At one stage, the oil and gas producer's shares fell to US$1.50 - a 51% fall intraday to its lowest level since March 1999 - before recovering to be down 34% at US$2.01.
The performance of the company's debt was even more painful for investors, although its performance has been some time coming and reflected the growing difficulties for the company faced with ever-falling energy prices.
The company's speculative grade-rated 600 mln euros-denominated 10-year benchmark paper, the January 2017, saw its price drop to around 52 euros in the past few weeks - rocketing yields to 126% - from around 90 euros in November. Bond prices and yields are directly and inversely related. Moody's rates the debt at B3, which is a notch right in the middle of the junk bond range of Ba1 down to C.
Back in November, the oil price had dropped to around US$40/barrel - the lowest in six years - and that sparked the start of yields shooting higher. The share price had also hit a 13-year low late in 2015.
The crux of the problem for behemoth Chesapeake is that by year end it was sitting on debt worth around US$11.5bn - which is some three times what the company's oil and gas fields are worth. In November, the company which accumulated most of its debt obligations under former chief executive officer Aubrey McClendon, had to write off US$5.4 bn from the value of those fields when it reported earnings.
Since then energy prices have continued to fall, with the oil benchmark, the West Texas Intermediate future deliverable in March, falling another 2% on Monday to US$30.25.
As well as a titan natural gas player, Oklahoma City-based Chesapeake is also the 12th largest producer of oil and natural gas liquids in the US. Following media reports, the company issued a carefully-worded statement earlier this session saying that "Kirkland & Ellis LLP has served as one of Chesapeake's counsel since 2010 and continues to advise the company as it seeks to further strengthen its balance sheet following its recent debt exchange. Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders."