Dallas-based independent Coho Energy Inc. and two of its subsidiaries, Coho Resources Inc. and Coho Oil & Gas Inc., have filed for voluntary bankruptcy protection under Chapter 11. Inadequate liquidity and capital resources and extreme indebtedness forced the company and its subsidiaries to make the filing at the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing will permit the company to continue business operations while it develops a plan to reorganize its financial affairs.

The timing was dictated mainly by a notice of default on Feb. 1 by the holders of the company’s senior debt. Coho had been in trouble for some time as low oil and gas prices and declining production cut into its cash flow.

Coho focuses on exploitation of underdeveloped oil and gas properties mainly in Oklahoma and Mississippi. Its operations have been focused on 19 major producing fields. For the nine months ended Sept. 30, 2001, its revenues fell 11% to $60.8 million and Coho had a net loss before extraordinary items of $6.7 million. Revenue declines reflected a decrease in prices for crude oil and lower daily natural gas production.

In April 2001, Coho entered into an agreement with financial advisor JP Morgan to evaluate various strategic transactions, including various recapitalization alternatives or the sale of all or part of its business. In September, the company announced a non-binding letter of intent to sell its Mississippi oil and gas assets to an undisclosed third party for $80 million, but that deal fell through.

Coho’s average net daily production over the first nine months of last year was 10,885 boe compared to 10,675 boe for the same period in 2000. While its crude oil production increased the increase was partially offset by decreases in natural gas production, decreases in crude oil and natural gas production on properties operated by third parties and losses of production due to power outages. The company ended up having insufficient working capital to make cash payments to eliminate a borrowing deficiency and was unable to obtain the necessary cash through an asset sale.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.