Bonanza Creek seeking to erase $850M in debt
Bonanza Creek Energy said Friday it will pursue a prepackaged bankruptcy filing at the start of the year in an effort to clear out more than $850 million in debt and start 2017 on a stronger financial footing.
Holders of more than half of the Denver company’s outstanding senior notes coming due in 2021 and 2023 have agreed to the restructuring deal.
NGL Crude Logistics and NGL Energy Partners, who buy and sell the company’s output, also have agreed to rework existing contracts to provide Bonanza Creek with more favorable terms.
In return for dropping their claims, creditors will receive 95.5 percent of the equity in the restructured company. The company plans to raise $200 million in fresh capital as it emerges from bankruptcy protection, which is planned for the first quarter.
“We are appreciative that our business partners and creditors recognize the value of Bonanza Creek’s employees and assets, and we are pleased that the agreement with our note holders provides value for all of our stakeholders, including existing equity holders,” said company CEO Richard Carty in a statement.
News of the agreement didn’t sit well with current shareholders in the company, who will get only 4.5 percent of the equity in the restructured company. Warrants could boost that to 7.5 percent, but additional shares are expected to be issued, which could further dilute those holdings.
Shares of Bonanza Creek fell $1.11 or 56.6 percent on Friday to close at 85 cents a share. The company, which investors valued at around $2.3 billion in the middle of 2014, now has a market value of $42.2 million.
As with many troubled oil and gas producers, Bonanza Creek borrowed heavily when oil prices were near or above $100 a barrel. But after prices started falling sharply in late 2014, it couldn’t generate enough cash to service that debt.
Earlier this month, law firm Haynes and Boone counted 114 bankruptcies among oil and gas producers in North America the past two years, with six of those based in Colorado. Another 110 oilfield service firms and 16 midstream companies have gone under since the start of 2015.
Besides Bonanza Creek, Forbes Energy Services and Memorial Production Partners also announced plans to seek bankruptcy protection on Friday.
Bonanza, which operates primarily in Weld County, said it expects to file its plan in Delaware bankruptcy court by Jan. 5 and that it has enough cash available to make royalty and lease payments, meet employee payrolls and pay its vendors.
The company drills primarily in the Wattenberg Field northeast of Denver.