Chesapeake Energy, a pioneer of the U.S. shale revolution, filed for bankruptcy protection on Sunday.
The move comes as the company and industry more broadly has been rocked by a drop in oil and gas prices amid the coronavirus pandemic.
The heavily indebted company has been in trouble for some time, and in May said that it had concerns regarding its long-term viability.
Chesapeake Energy said that $7 billion in debt will be wiped out through the restructuring.
The company has secured $925 million in debtor-in-possession financing in order to continue operations during the bankruptcy process.
In addition, Chesapeake has secured an agreement in principle from certain existing lenders for $2.5 billion in debt financing on emergence from bankruptcy, as well as a backstop commitment for $600 million in new equity.
The company will continue operations at a much reduced capacity, with a handful of gas rigs and no oil rigs.
“We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths,” CEO Doug Lawler said in a statement.