Chisholm seeks bankruptcy protection
TULSA—Privately owned Chisholm Oil and Gas Operating is seeking Chapter 11 bankruptcy protection as it aims to shed $517 million in debt, court filings show.
The company, founded in 2017 to acquire, develop and produce oil and natural gas assets in the Anadarko Basin in Oklahoma, fell on hard times after disappointing well results and couldn't recover before this year's energy market collapse.
A filing in the case by Matthew J . Henry, a managing director with the global restructuring advisory firm Alvarez & Marsal North America, stated his company was hired by Chisholm in early March to explore its options.
Henry stated in an affidavit that Chisholm was founded by Robert Zinke, a successful oil and gas prospector with 43 years of experience, and Apollo Global Management, a firm he had worked with to identify oil and gas investment opportunities.
Ultimately, they identified and acquired about 53,000 acres located in the STACK play near King fisher that was owned by Stag horn Petroleum, another private operator in the play.
After that, Chisholm grew its assets in the play by acquiring others, including those previously owned by Ga star Exploration, another private operator who also recently went through a bankruptcy process.
Operations detailed
Henry' s affidavit stated Chisholm primarily drills horizontal wells that seek to produce oil and natural gas from formations inside the STACK play, earning revenues from the sale of those commodities from its wells.
At the time the company filed for bankruptcy, it held about 152,000 contiguous acres of oil and gas interests concentrated in Kingfisher County, and employed 32 people, not including independent contractors.
The company maintains operational control over about 90% of its reserves and contracts
with various third parties to operate the remainder.
When the company filed i ts petition on June 18, it was operating 80% of its wells. However, the company isn' t currently engaged in any drilling activities, Henry's affi - davit stated.
The company also owns saltwater disposal assets owned by a subsidiary, Cotton mouth SWD.
It also, through Chisholm Mid stream, owns 35% equity in Great Salt Plains Mid stream Holdings, which provides Chisholm with gathering, transportation and processing for its produced oil and natural gas to bring the commodities to market.
Great Salt Plains isn't a party to the bankruptcy cases, Henry's affidavit stated.
Bankruptcy causes
Henry's affidavit stated Chisholm began to encounter financial difficulties last
year after certain wells it had drilled and completed failed to perform as expected.
After repeatedly missing engineers' projections, Chisholm replaced that team and rewrote i ts financial and drilling plans.
While subsequent wells performed better, dropping commodity prices prevented it from fully implementing its plans.
Changing market conditions also prevented the company from obtaining additional needed capital, forcing it to shutter its drilling program.
The company obtained Henry's firm earlier this year to help it analyze the best way to move forward, just as a war for global market shares of crude oil between Saudi Arabia and Russia commenced and as the economic shutdown caused by C OVID -19 caused commodity prices to collapse.
“The unprecedented reduction in oil prices further disrupted Chisholm' s re capitalization efforts. Chisholm was forced to suspend its extraction operations and conduct multiple
reductions-in-force top reserve liquidity ,” Henry's filing stated.
The company, with the help of Henry's firm, also entered into extensive negotiations with its financial backers to obtain their support f or i ts reorganization plans.
A resulting restructuring agreement agreed to by nearly 100% of those backers, Henry stated, will allow the company to emerge capable of continuing as a going concern.
“The restructuring transaction offers the company the opportunity to take advantage of an approximately threemonth Chapter 1 1 pr o - cess to implement a restructuring that addresses its nearterm liquidity and strengthens its balance sheet through a significant de-leveraging, while allowing operations to go forward on an ordinary-course- basis.
“This will enable the company to maximize the value of its assets for all stakeholders and emerge from these Chapter 1 1 Cases posi - ti on ed for growth and success ,” Henry stated.