A U.S. bankruptcy court has approved Penn Virginia Corp.'s restructuring plan a month after the 134 year-old company filed for Chapter 11 protection, giving it what could be a swift exit from the proceedings.
Headquartered in Radnor, PA, about 19 miles northwest of Philadelphia, the company voluntarily filed for bankruptcy in May, citing the abrupt and sustained decline in commodity prices that has persisted since 2014 and pushed dozens of oil and natural gas producers across the country into similar financial situations (see Shale Daily, May 12).
On Monday, the U.S. Bankruptcy Court for the Eastern District of Virginia approved Penn Virginia's plan, which would allow it to raise $50 million by issuing new common stock, secure $25 million in debtor-in-possession financing to maintain its operations during the bankruptcy and another $128 million in exit funds. Penn Virginia is hoping to eliminate its $1.2 billion in outstanding debts and has the backing of more than three quarters of its senior noteholders and all of its lenders.
"Once the restructuring is implemented, the company will have substantially less debt and a much stronger balance sheet," interim CEO Edward B. Cloues said in May. Restructuring, he added, would provide the company with a way to quickly emerge from the proceedings.
The company has assets in the Midcontinent and the Marcellus and Eagle Ford shales. The Eagle Ford of South Texas, however, is Penn Virginia's primary focus. It has about 100,000 net acres there in the volatile oil window of Gonzales and Lavaca counties, which accounted for 92% of its proved reserves at year-end 2015.
The company had just $32.3 million in cash on hand before it filed for bankruptcy. Trading of its shares were suspended by the New York Stock Exchange in January and it suspended its drilling program in February.
The court's approval does not bar Penn Virginia from negotiating with other parties that propose alternatives to its restructuring deal, such as Republic Midstream LLC, which has filed a plan that it said would cost the producer less. Owned by the private equity firm ArcLight Capital Partners LLC, Republic reached a deal with Penn Virginia in July 2014 to construct and operate a crude oil gathering system, central delivery terminal and a takeaway pipeline to serve its core Eagle Ford acreage.
The agreement is backed by long-term, fee-based transportation from the dedicated acreage and Republic said its own restructuring plan would cost less to execute and provide Penn Virginia with $30 million to resume drilling. With its own restructuring plan, however, Penn Virginia said it anticipates emerging from bankruptcy proceedings by the end of the summer.