Anadarko Basin-focused Chaparral Energy Inc. said Monday a voluntary bankruptcy protection plan is in the offing to reduce debt and continue operating.
The Oklahoma City-based independent, which filed Chapter 11 petitions in U.S. Bankruptcy Court for the District of Delaware, has a restructuring support agreement (RSA) with funded debt holders to equitize $300 million of existing obligations and receive $175 million to bolster liquidity. Chaparral also filed for bankruptcy in 2016.
With creditor support, the restructuring should be “completed relatively quickly,” management said. Chaparral in May signaled it was facing restructuring as it released rigs contracted to drill wells and halted completion activities following the historic plunge in demand in the wake of the coronavirus pandemic.
“While we have taken carefully measured and decisive action to address the challenges of 2020, the overall impact to the energy industry, including Chaparral, has been severe,” CEO Chuck Duginski said. “Therefore, after thorough analysis of our strategic options, we determined that a voluntary Chapter 11 filing with broad creditor support provides the best course for Chaparral and its stakeholders.
“A swift restructuring will right-size our balance sheet, improve our cost structure and best position Chaparral for the future. Importantly, we intend to maintain normal operations and meet all of our trade commitments timely and under their existing terms.”
As of last Friday (Aug. 14), Chaparral had about $32 million of cash on hand, considered sufficient to maintain “normal operations and meet its other financial commitments throughout the Chapter 11 restructuring period.”
The company plans to continue to pay wages and benefits, make royalty/interest payments and pay suppliers/vendors. Additionally, Chaparral has terminated all outstanding derivative contracts, with proceeds from the early termination totaling $28.2 million. The company used $24 million to pay down debt to $188.5 million.
Davis, Polk & Wardwell LLP is acting as legal counsel, while Rothschild & Co and Intrepid Partners LLC are acting as investment bankers; Opportune LLP is financial adviser. Sidley Austin LLP is acting as legal counsel to the board.
Meanwhile, Permian Basin pure-play Lilis Energy, which filed for protection in June with an RSA in hand, said entities affiliated with potential sponsor Värde Partners have declined to sponsor the reorganization.
The Fort Worth, TX-based independent said it plans to pursue buyers for most of the Permian assets, including in the Delaware sub-basin. The proposed bidding procedures were filed with the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. A hearing on selling the assets is set for Friday (Aug. 21).
“While the company is disappointed that the Värde Funds declined to pursue the new money investment contemplated by the RSA, we are confident there will be significant interest in the company’s highly contiguous block of approximately 16,000 net acres located in the deep and over-pressured portion of the Delaware Basin, including Winkler and Loving counties in Texas and Lea County in New Mexico,” CEO Joseph C. Daches said.
Vinson & Elkins LLP is serving as legal adviser, Barclays Capital is investment banker, and Opportune LLP is serving as restructuring adviser.
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