Bo­nanza Creek seek­ing to erase $850M in debt

The Denver Post - - BUSINESS - By Aldo Svaldi Aldo Svaldi: 303-954-1410, as­valdi@den­ver­post.com or @al­dos­valdi

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.

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