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Samson Resources, Sabine Now Plagued With Solvency Issues

Tulsa-based Samson Resources Corp. is exploring its options and considering whether to seek bankruptcy protection as the best way to restructure its debt load. Sabine Oil & Gas Corp. also disclosed it is working to avoid defaulting on its debt.

The onshore operators made the disclosures in separate filings with the Securities and Exchange Commission.

Asset sales, securing more debt and other measures are being considered to avoid liquidation, but filing under Chapter 11 of the U.S. bankruptcy code "may provide the most expeditious manner in which to effect a capital structure solution," Samson said in the company’s 2014 annual report.

Samson, controlled by private equity firm KKR & Co., also disclosed that an audit has found that the financial condition of the company raises substantial doubt about continuing as a going concern.

"We expect ultimately to seek a restructuring, amendment or refinancing of our debt," Samson said.

Houston-based Sabine, which merged with Forest Oil Corp. last year, said based on "discussions with the lenders under the revolving credit facility, the company believes that its borrowing base may be reduced significantly." The credit squeeze raises "substantial doubt" about its the ability to continue as a going concern, management said. Sabine had fully drawn its $1 billion revolving credit line as of March 15 and had about $327 million in cash on hand.

"We recognize that market dynamics have changed considerably in the past year, which has impacted the company's financial position," said CEO David Sambrooks. "Our management team and board of directors are taking proactive steps to strengthen our balance sheet and enhance liquidity."

Sabine has hired Lazard Ltd. and law firm Kirkland & Ellis LLP to consider strategic alternatives. "We fully expect to continue operating in the ordinary course throughout this process," Sambrooks said.

Three U.S.-based publicly held producers already have filed for protection since the oil price debacle, Quicksilver Resources Inc., Dune Energy and BPZ Resources, as well as oilfield services provider Cal Dive International (see Shale Daily, March 18 and Daily GPI, March 9; March 4a). Several Canadian energy operators also are in financial turmoil. In January Calgary-based Gasfrac Energy Services Inc. sought protection; it has since sold its assets (see Shale Daily, March 4b; Jan. 16).

The job losses across the U.S. energy sector also continue to pile up. Frank's International NV said it is cutting up to 600 employees. The firm had 4,800 employees around the world at the end of last year. Last month the operator, whose business operations are based in Houston, agreed to buy competitor Timco Services Inc. to expand its U.S. oilfield services, particularly in Texas (see Shale Daily, March 12).

Spokesman Josh Grodin said the company "has been developing and implementing cost savings opportunities while continuing to focus on our strategic growth plan. As with other oil service companies, Frank's has also been impacted by the sudden and dramatic drop in energy prices and rig count that we have seen over the last seven to eight months. In association with these cost savings opportunities and as part of our performance improvement plan, we announced...a workforce reduction that we expect to reduce our workforce by approximately 400-600 employees in areas and functions where we are experiencing the sharpest decline in activity levels."

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