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.
Chesapeake, a shale gas pioneer, borrowed aggressively to buy and drill properties and began losing money as gas prices plummeted. U.S. natural gas futures traded at $1.73 per million British thermal units (mmBtu) on Monday, down from more than $13 in 2008.
The suit, filed in Oklahoma state court on April 3, seeks $48.8 million and expenses for breach of contract.
A spokesman for Chesapeake did not respond to requests for comment.
Chesapeake Energy last month tapped debt restructuring advisers Kirkland & Ellis LLP and Rothschild & Co to help it deal with creditors amid an unprecedented drop in oil demand and plummeting prices for its output.
In January, Chesapeake cut debt by $900 million, and a month later reported about $1.4 billion in cash and borrowing ability to address looming debt maturities. The company had about $9 billion in debt at the end of 2019.
Chesapeake shares traded at 16 cents apiece on Monday, down from $2.91 a year earlier. Shareholders on Monday approved a reverse stock-split to prevent a de-listing on the New York Stock Exchange.
The Chesapeake board voted to swap one share for every 200 shares, effective 5 p.m. Tuesday, reducing the shares outstanding to 9.784 million, from 1.957 billion on April 10. It also voted to cut total authorized shares to 22.5 million from 3 billion previously, the company said in a statement.
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