Denver-based Venoco Inc. joined more than 40 energy firms Friday in filing for voluntary Chapter 11 bankruptcy protection since oil prices began tumbling in 2014.
The onshore operator, whose primary focus is producing oil in California’s onshore and offshore, listed assets worth $100-500 million and liabilities of $500 million to $1 billion. The filing [16-10655] was made in U.S. Bankruptcy Court, District of Delaware.
"After carefully evaluating our options, we have determined that the agreement to restructure our balance sheet and reduce our debt represents the best way to strengthen our finances and position ourselves for the future,” CEO Mark DePuy said.
The company has sufficient liquidity to continue its normal oil and gas activities and meet its ongoing financial and regulatory obligations. Upon approval by the bankruptcy court and satisfaction of customary conditions, the company's existing liquidity and generated cash from ongoing operations would be used to support the company during the restructuring process.
Venoco founder Tim Marquez is to remain executive chairman during the restructuring. The company's senior lenders have retained him to provide leadership and strategic counsel to the company after it emerges from restructuring.
Venoco isn’t going through bankruptcy alone. Fitch Ratings said Thursday the trailing 12-month default rate in the energy sector may surpass 20% this year (see Shale Daily, March 17). Overall, Fitch is projecting slightly under $90 billion in 2016 defaults, which would be the third highest on record.
Last month Venoco missed a $13.7 million interest payment on senior secured notes and said it was working on debt restructuring options. At the time, management said it had enough liquidity to continue normal operations, but declining commodity prices, as well as a shuttered oil pipeline in California, created “significant challenges.”
Last year Venoco’s production activities were halted at its Platform Holly in the South Ellwood field of California’s Santa Barbara Channel following a rupture of a pipeline owned and operated by Plains All American Pipeline LP. Oil produced from Venoco's Platform Holly and related facilities is sold to a third party before it enters the Plains pipeline at an onshore location, together with oil produced by other offshore operators in the Santa Barbara Channel.
The shut-in reduced Venoco’s oil output by more than 50%, it said. Restart of the pipeline remains uncertain, although Santa Barbara County officials are allowing some stored oil to be transported via truck.
"While we continue to be in a strong cash position, the declining price of oil and the ongoing closure of Plains All American pipeline 901 continue to be serious problems,” DePuy said. “With this agreement, Venoco will be in a much stronger position to withstand these challenges and others that may follow.”
Venoco was cofounded by Marquez in 1992 and he served as CEO until 2002, when he resigned to found Marquez Energy. Marquez Energy then acquired Venoco in 2005. Venoco was taken private in 2012 in a transaction valued at $382.7 million.
"I truly love the company we built in and around Santa Barbara County and its community," said Marquez. "It is the employees of Venoco that live in and contribute to the community that make Venoco a great company. It is unfortunate that a third party pipeline spill has impacted Venoco, but this process will make it stronger and ensure its continued contributions to the Santa Barbara County community."
The company’s California holdings include the South Ellwood Field, Santa Clara Federal Unit, Dos Cuadras Field and Beverly Hills West Field. It also has a 22.45% reversionary interest in the Hastings Complex near Houston.