Lower 48 explorer EP Energy Corp. has joined a growing list of operators to voluntarily seek bankruptcy protection to better position for the long term.
EP initially had an array of liquids-rich properties extending across Texas, Louisiana, the Raton Basin and the Rocky Mountains. Exploration programs are underway today mostly in the Permian Basin and the Eagle Ford Shale.
The petitions for Chapter 11 reorganization were filed in U.S. Bankruptcy Court for the Southern District of Texas.
"Like other companies in our industry, we continue to experience challenging dynamics as a result of depressed commodity prices, and we have been very transparent about our ongoing efforts to actively manage our capital to control spending and preserve liquidity,” CEO Russell Parker said. “Our entire team is focused on running the company, and we are committed to working with our vendors, royalty owners, lessors and business partners just as we always have."
Business operations are expected to continue without interruption, “during which we will continue making improvements to our operational execution and capital efficiency,” Parker added. “The company has reached an agreement in principle on a comprehensive restructuring with a number of its key creditors, but made the decision that the protection of Chapter 11 would help the parties get the deal over the finish line.
“Over the coming days and weeks, we will continue working with our creditors and stakeholders to propose a plan of reorganization that will considerably strengthen our balance sheet and provide the financial flexibility to continue building our business through the current market environment."
The company expects to use cash on hand and cash flow generated by ongoing operations to support the business as it enters the court-supervised process.
The Houston exploration and production company began trading over the counter in May after the New York Stock Exchange moved to delist it. The company was spun off in 2011 by El Paso Corp., once one of the largest natural gas pipeline operators in the country before its takeover by Kinder Morgan Inc. EP began trading publicly in 2014.
Rystad Energy last month said the uptick in voluntary restructurings was not a harbinger of doom. However, for the first time in three years, U.S. producers are expected to see their borrowing bases decline on a worsening outlook for commodity prices, according to a survey conducted last month of 221 industry respondents by Haynes and Boone LLP. As of mid-August, about 26 North American explorers had filed for bankruptcy, according to the law firm.
Weil, Gotshal & Manges LLP is serving as EP’s legal counsel while Evercore LLC is financial adviser and FTI Consulting Inc. is the restructuring adviser.