After months of negotiations with its creditors, Stone Energy Corp. has filed for Chapter 11 bankruptcy protection to wipe out $1.2 billion of debt through a pre-packaged restructuring plan that would turn the company over to its noteholders if approved.
Noteholders would receive 96% of the company's common stock after reorganization and $100 million in cash from the $350 million sale of its Appalachian assets in Northern West Virginia and Northwest Pennsylvania to an affiliate of Tug Hill Inc. Current stockholders would receive just 4% of the reorganized company's common stock under the plan, which was filed in the U.S. Bankruptcy Court for the Southern District of Texas.
While a majority of creditors have entered the restructuring agreement, the company's largest shareholder, Thomas Satterfield, doesn't support it and plans to challenge it in court, saying in a regulatory filing last month that he believes the restructuring "disproportionately impairs the interests of [Stone's] common shareholders and unfairly advantages other stakeholders, especially the issuer's board of directors and management."
Stone and its subsidiaries said they would continue to operate as debtors in possession during the bankruptcy, saying they have adequate liquidity for that time and won't require financing. The company plans to pay its vendors, royalty owners and others as it normally would. If all goes according to plan, Stone said it could emerge from bankruptcy in about 90 days.
Low commodity prices in Appalachia squeezed the company's prices. If the sale there is approved, Stone would be left with offshore assets in the Gulf of Mexico. The company said earlier this month that its Amethyst well remains shut in as the company continues to assess a tubing leak. Stone warned that it might not be able to restore the well's production.
The company also expects that its stock will continue to be listed on the New York Stock Exchange throughout bankruptcy proceedings as long as it meets listing standards.