May 22, 2019
On May 22nd 2019, Elk Petroleum Aneth, LLC and Resolute Aneth, LLC voluntarily filed petitions for Chapter 11 bankruptcy with a restructuring support agreement with their noteholders. The debtors already have a plan of reorganization on file. Per the disclosure statement, the debtors claim that the cause of its financial distress and eventual bankruptcy was due to:
Debtors’ ambitious endeavors to acquire multiple oil and gas assets outpaced the Debtors’ balance sheet, and in certain respects, performance of the operated and non-operated assets failed to meet initial expectations.
The debtors tried to alleviate uncertainty of future cash flows through hedging oil prices. Oil prices went up, however, not down, and the hedging was, with the benefit of 50/50 hindsight, clearly a bad mistake. Here is what they have to say about that:
Debtors were unable to capture the financial benefits of the improving commodity price environment due to their hedge obligations under the BP ISDA.
Whoops. The Debtors are to receive $10mm in Debtor-in-Possession financing by certain supporting noteholders. All in all, the cause of distress continues to align with the reason for other bankruptcy filings in O&G land we’ve touched on. High fixed costs, lower than expected revenues and impatient lenders.
Jurisdiction: District of Delaware (Judge Laurie Silverstein)
Pre-Petition Capital Structure:
Revolving Credit Facility: $14.5mm FO Revolver (AB Elk Holdings LLC)
First Lien Credit Facility: $114.0mm TL (HPS Investment Partners)
Unsecured Debt: $54.9mm TL (LIM Asia Special Situations Master Fund Limited, AB Elk Holdings, ACR Multi-Strategy Quality Return (MQR) Fund, A Series of Investment Management Series Trust II (“ACR”), Fulcrum Energy Capital Fund II, LLC)
Legal: Proposed Debtors & Debtors-in-Possession - Norton Rose Fulbright LLP (Gregory M. Wilkes, Kristian W. Gluck, Scott P. Drake, John N. Schwartz & Shivani Shah) Womble Bond Dickinson LLP (Matthew P. Ward & Morgan L. Patterson)
Financial Advisor: Ankura Consulting Group, LLC (Scott M. Pinsonnault), Opportune LLP
Investment Banker: Stephens Inc.
Claims Agent: Stretto (*click on the link above for free docket access)
Other Parties in Interest:
HPS Investment Partners: Provider of First Lien Term Loan
Certain unsecured loan holders:
AB Co-Invest Elk Holdings LLC
Certain secured debt holders:
AB Elk Holdings LLC
Riverstone Credit Partners - Direct, L.P.
Riverstone Credit Partners II - Direct LP
Riverstone Strategic Credit Partners S, L.P.
Riverstone Strategic Credit Partners A-2 AIV, L.P.