Warren Resources Inc. has defaulted on a $7.5 million interest payment for its 9% senior unsecured notes that was due on Feb. 1, bringing it one step closer to bankruptcy proceedings.
As a result of missing the payment, noteholders can now demand full payment of the $167.3 million outstanding. The company's first and second lien credit facilities are also threatened by the default as the lenders can declare those debts due immediately. Warren said last week that out-of-court debt restructuring negotiations are continuing with its lenders and added that its debt obligations have not yet been accelerated.
"Although Warren is continuing to seek a workable agreement regarding a consensual, out-of-court restructuring of its indebtedness, a failure to achieve such an agreement will likely necessitate seeking protection from its creditors through a bankruptcy proceeding, in order to preserve and maximize value for its stakeholders," the company said.
Warren said consistently low oil prices and a need to rework its debt led to default on the notes. First and second lien creditors, along with investors, held about $453 million in Warren debt and senior unsecured notes at the end of last year. The company had $26.8 million in cash at that time.
In 2014, Warren acquired Citrus Energy Corp. and 5,289 net acres in the Marcellus Shale for $352.5 million (see Shale Daily, July 8, 2014). It brought its first two Marcellus Shale wells online in the state in 2015 (see Shale Daily, Aug. 18, 2015). It also has waterflood oilfield recovery operations in California and coalbed methane assets in Wyoming.
The last year or so has been marked by cost-cutting initiatives for Warren. It said last month that it would idle its drilling program and spend no capital this year on new wells (see Shale Daily, Feb. 9). It has also moved its corporate headquarters from New York City to Denver and closed another office in New Mexico, eliminating staff at those locations to save money (see Shale Daily, Oct. 1, 2015).
The company's stock, which is listed on the Nasdaq, has traded at a 52-week range of 8 cents to $1.27 per share. Warren said last week that the Nasdaq Hearings Panel has determined that the company's stock can continue to trade on the market through June 20, subject to a variety of conditions.
Warren must provide the panel with a restructuring update on or before April 20 and complete a reverse stock split that results in a minimum closing bid price of $1/share for at least 10 consecutive trading days. If Warren is unable to maintain compliance with the minimum bid requirement before June 20, the company said, then the panel would delist its common stock and suspend trading.
"We caution investors that we cannot provide any assurance that Warren will be able to achieve a restructuring of its debt outside of a bankruptcy proceeding," regardless of the Nasdaq reprieve, said CEO James Watt.