Whiting Petroleum files for Chapter 11
This is a pretty big deal. In Q4 Whiting Petroleum produced 123,000 BOE/d. Much of that is natural gas with around 80K bpd of oil. It's not clear how much of that will be shut in during Chapter 11.
This company was a favourite of shale shorts, including myself. It was at $8 early in the year but has been in a death spiral for years.
The company drew down on its $650m credit facility yesterday -- I'd hate to be the bank on the other side of that.
Here's the statement:
Commences Chapter 11 Reorganizational Process to Right-Size Capital Structure
DENVER--(BUSINESS WIRE)--Apr. 1, 2020-- Whiting Petroleum Corporation (NYSE: WLL) and certain subsidiaries (collectively, "Whiting" or the "Company") today announced that they had commenced voluntary Chapter 11 cases under the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court"). The Company has more than $585 million of cash on its balance sheet and will continue to operate its business in the normal course without material disruption to its vendors, partners or employees. Whiting currently expects to have sufficient liquidity to meet its financial obligations during the restructuring without the need for additional financing.
The Company has also reached an agreement in principle with certain holders (the "Supporting Noteholders") of its 1.25% convertible senior notes due 2020, 5.750% senior notes due 2021, 6.250% senior notes due 2023, and 6.625% senior notes due 2026 (collectively, the "Notes") regarding a term sheet (the "Term Sheet") that contemplates a comprehensive restructuring. The proposed financial restructuring, the terms of which will be set forth in a forthcoming restructuring support agreement between the Company and the Supporting Noteholders, would significantly reduce the Company's debt and establish a more sustainable capital structure pursuant to a consensual chapter 11 plan of reorganization (the "Plan") that would be supported by the Supporting Noteholders on the terms of such restructuring support agreement.
The Plan will provide for, among other things: (1) significant de-leveraging of the Company's capital structure by over $2.2 billion through the exchange of all of the Notes for 97% of the new equity of the reorganized Company to be issued pursuant to the Plan; (2) payment in full in cash and/or refinancing of the Company's revolving credit facility; (3) the payment in full in cash of all other secured creditors, tax and other priority claimants, and employees; and (4) the Company's existing equity holders receiving 3% of the new equity of the reorganized Company and warrants (as described in the Term Sheet). Consummation of the Plan will be subject to confirmation by the Bankruptcy Court in addition to other conditions to be set forth in the Plan and related transaction documents.
Bradley J. Holly, the Company's Chairman, President and CEO, commented, "In 2019, we took proactive steps to reduce our cost structure and improve our cash flow profile. We continue to build on these actions in 2020. The Company has also explored a wide variety of alternatives to address our balance sheet and looming note maturities in a highly capital constrained market environment.
Given the severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi / Russia oil price war and the COVID-19 pandemic, the Company's Board of Directors came to the conclusion that the principal terms of the financial restructuring negotiated with our creditors provides the best path forward for the Company. We are pleased to have secured a highly constructive restructuring framework with a critical mass of our noteholders. Through the terms of the proposed restructuring, we believe a right-sized balance sheet will enable us to capitalize on our enhanced cost structure, high-quality asset base and successfully compete in the current environment."
Mr. Holly continued, "I want to express my gratitude to the employees for their continued dedication and hard work, and to our service providers and business partners for their ongoing support during this time. Following the restructuring process, we look forward to having substantially less debt and a significantly improved outlook for our Company and its stakeholders."