Pipeline operator sues Chesapeake Energy over payment dispute

[BENGALURU] Pipeline operator Glass Mountain LLC is suing troubled oil and gas producer Chesapeake Energy Corp for allegedly defaulting on an oil transportation contract that had been renegotiated weeks earlier.

The shale gas pioneer borrowed aggressively to buy and drill properties and began losing money as gas prices plummeted. US natural gas futures traded at US$1.73 per million British thermal units (mmBtu) on Monday, down from more than US$13 in 2008.

The suit, filed in an Oklahoma state court on April 3, seeks US$48.8 million and expenses for breach of contract.

A spokesman for Chesapeake did not immediate reply to a request for comment.

A shale gas pioneer, Chesapeake Energy last month tapped debt restructuring advisors Kirkland & Ellis LLP and Rothschild & Co to help its deal with creditors amid an unprecedented drop in oil demand and plummeting prices for its output.

In January, it had cut debt by US$900 million, and in February had said it had about US$1.4 billion in cash and borrowing ability to address looming debt maturities. The company had about US$9 billion in debt at the end of 2019.

Chesapeake shares traded at 16 cents apiece on Monday, down from US$2.91 a year earlier. Shareholders were due to vote on Monday on a reverse stock-split seeking to prevent a de-listing on the New York Stock Exchange.

REUTERS