Sanchez Energy closer to Chapter 11

The Houston oil and gas company Sanchez Energy took another step towards Chapter 11 bankruptcy on Monday when it entered into a 30-day grace period on a critical debt payment to negotiate a reorganization plan with creditors.

Sanchez said after stock markets closed Monday that it missed its July 15 interest payment due on a set of senior notes worth $250 million. Senior notes are a type of debt issued by publicly traded companies that get paid ahead of other creditors.

The company’s senior notes, which pay 6.125 percent interest, were issued in September 2014 and are due in September 2023. They require Sanchez to make monthly interest payments. The company has until Aug. 14 to make the interest payments before being considered to be in default.

“Sanchez Energy continues to maintain strong cash liquidity and is operating its business in the normal course,” the company said in a statement on Monday.

Founded in 2011, the exploration and production company with more than 300 employees is run by Antonio “Tony” Sanchez III, whose father — the famed Laredo businessman and former Texas gubernatorial candidate Antonio “Tony” Sanchez Jr. — is chairman of the board.

The company, however, has struggled in recent years. Sanchez Energy, like other companies, was hit hard by the two-year oil bust that began in 2014. The company lost nearly $1.5 billion

in 2015, according to financial filings. Just as oil prices began to stabilize, Sanchez Energy entered into a joint venture with New York private equity firm Blackstone Energy Partners to buy Andarko’s Eagle Ford leases as part of a $2.3 billion deal in January 2017.

Production volumes and revenues began to rise following that deal, but not fast enough to keep up with interest payments and preferred stockholder obligations.

The company reported two profitable quarters before returning to the red during the fourth quarter of 2017. The company lost $9.7 million in 2018 on $1 billion in revenues. Sanchez reported a net loss of about $67 million in the first quarter of 2018.

Amid sagging financial and stock performance, Sanchez was delisted from the New York Stock Exchange in February. Its stock is trading at 10 cents a share on the OTC Pink Sheets trading platform.

Sanchez Energy was ranked as the third most active driller in the Eagle Ford Shale of South Texas last year, but data from the Railroad Commission, which oversees the oil and gas industry in Texas, shows the company slid to eighth place in the first half of 2019.

New York private equity firm Apollo Global Management LLC is considering buying some of Sanchez’s debt, Bloomberg reported on Friday.