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Dune Scraps Eos Merger, Files for Chapter 11 Bankruptcy

Five days after announcing it was scuttling a proposed merger, Houston-based Dune Energy Inc. voluntarily filed for Chapter 11 bankruptcy protection and plans to request approval of $10 million in debtor-in-possession financing from its pre-bankruptcy lenders.

In a statement Monday, Dune said it filed a petition for relief in the United States Bankruptcy Court for the Western District of Texas. Dune, an independent exploration and production (E&P) company focused on the Louisiana and Texas Gulf Coasts, said it will continue to operate its oil and gas production facilities as a debtor-in-possession.

On March 4, Dune filed a Form 8-K with the U.S. Securities and Exchange Commission (SEC), stating that it had terminated an agreement and merger plan with another E&P, Los Angeles-based Eos Petro Inc. and Eos Merger Sub Inc., which was first announced last September. According to Dune, "Eos failed to complete the tender offer and pay for the shares of the company's common stock validly tendered after the expiration date of the offer.

"As a result, the company believes that Eos is in breach of the merger agreement and has demanded the $5.5 million termination fee pursuant to the terms of the merger agreement."

Last December, Eos told Dune that the decline in oil prices was preventing it from completing the merger, and that it could not tender an offer under the terms of the merger agreement. At the time, Dune and Eos said they were in the process of negotiating potential revised terms for a merger. According to the 8-K filing, the offer expired on Feb. 27.

According to the most recent investor presentation posted on its website, Dune held approximately 81,683 gross acres in Louisiana and Texas as of January 2014, overlying 20 producing oil and gas fields. The company said its core producing areas include the Bateman Lake, Garden Island Bay and Leeville fields, located in Louisiana's St. Mary, Plaquemines and Lafourche parishes, respectively.

Dune said Parkman Whaling LLC, an independent investment bank and financial advisory firm based in Houston, has been retained to run the sales process pursuant to a sales procedure order. Dune added that it has also filed a motion for sale under Section 363 of the U.S. Bankruptcy Code, and anticipates that a restructuring process will be completed in less than 130 days.

Dune sold its Barnett Shale assets in Texas's Denton and Wise counties for $41.5 million to an undisclosed buyer in 2008 (see Daily GPIJuly 9, 2008). It acquired its current Gulf Coast assets -- 65,000 net acres in Louisiana and Texas -- after purchasing Goldking Energy Corp. for $320.5 million in cash and stock in 2007 (see Daily GPIApril 19, 2007).

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