Chesapeake Adopts Poison Pill After Shares Plummet

(Bloomberg) -- Chesapeake Energy Corp. adopted a poison pill after the oil-price crash and coronavirus pandemic sent the debt-burdened shale pioneer’s shares tumbling.

The shareholder rights can be exercised if a person or group acquires 4.9% or more of Chesapeake’s outstanding common stock, the company said Thursday in a statement. Under those conditions, holders of the rights can buy common shares at a 50% discount or Chesapeake can exchange each right for one share.

Chesapeake was already in a precarious position before the Covid-19 outbreak sent crude demand plummeting. At its height more than a decade ago, the producer was a $37.5 billion company led by Aubrey McClendon, an outspoken advocate for the gas industry. But Chesapeake’s success at extracting the fuel from deeply buried rock contributed to a massive gas glut. While the company has pushed to transition into an oil explorer, that move could prove pointless after crude’s historic crash.

Earlier this month, Chesapeake shareholders approved a reverse stock split of one share for as many as 200 shares. The company is one of the most endangered oil producers, with $192 million of bonds coming due in August, out of a total debt load of more than $9 billion.

To contact the reporter on this story:
Christine Buurma in New York at cbuurma1@bloomberg.net

To contact the editors responsible for this story:
Simon Casey at scasey4@bloomberg.net
Christine Buurma, Patrick McKiernan