⛽️New Chapter 11 Bankruptcy Filing - Edgemarc Energy Holdings LLC⛽️

Edgemarc Energy Holdings LLC

May 15, 2019

Pennsylvania-based Edgemarc Energy Holdings LLC and its eight affiliated debtor affiliates are the latest in a string of oil and gas related bankruptcy filings. Don’t let $73/barrel brent crude and $63/barrel West Texas Intermediate prices full you: this is one of many oil and gas filings on the near term horizon.

Edgemarc is a natural gas E&P company focused on the Appalachian Basin in Ohio and Pennsylvania; it and its affiliates control approximately 45k net acres and have drilled and developed 60 producing wells. Now, everyone knows that, right now, the Permian Basin in West Texas is the shizz and, therefore, hearing about the Appalachian Basin may put some of you on edge. But, here, there was an extraordinary externality that really helped push the company into bankruptcy, other more macro factors notwithstanding.

In September 2018, a pipeline and gathering system under construction by a third-party (ETC Northeast Pipeline LLC) exploded. This pipeline was meant to be the gathering and processing avenue for the debtors’ natural gas. Imagine spending a ton of time milking a farm full of cows only to have the production facility designed for processing and transporting the milk explode right as you were about to bring your product to market. Kinda hard to make money in that scenario, right? The same applies to drilling for natural gas: its hard to generate revenue when you can’t process, transport and sell it. And, unfortunately, repair hasn’t been easy: what was supposed to be a “within weeks” project now looks poised to push well into 2020.

According to the debtors, a subsequent dispute with ETC prevented the debtors from flowing their gas through alternative pipelines. Consequently, the debtors “had no other means of selling gas from the affected wells” and opted to “shut in” their Pennsylvania wells and pause all remaining Pennsylvania operations — a hit to 33% of the company’s production activity. Compounding matters, the debtors and ETC are now embroiled in litigation. 😬

Suffice it to say that any company that suddenly loses the ability to sell 33% of its product will struggle. Per the company:

The Debtors’ inability to sell gas from their Pennsylvania properties had a substantial negative impact on their liquidity and ability to satisfy their funded debt, contractual and other payment obligations.

Ya think?!?!? The debtors have approximately $77mm of funded debt; they also has fixed transportation services agreements pursuant to which they agreed to fixed amounts of transportation capacity with various counterparties that exposes the debtors to financial liability regardless of whether they actually transport nat gas. This is so critical, in fact, that the debtors have already filed motions seeking to reject transportation services agreements with Rover Pipeline LLC, Rockies Express Pipeline LLC, and Texas Gas Transmission LLC. Combined, those three entities constitute 3 of the top 4 creditors of the estate, to the tune of over $6mm. These obligations — along with a downward redetermination of the borrowing base under the debtors’ revolving credit facility — severely constrained the debtors’ ability to operate. The debtors have, therefore, filed for chapter 11 with the hope of finding a buyer; they do not have a stalking horse purchaser lined up (though they do have a commitment for a $107.79mm DIP from their prepetition lenders, of which $30mm is new money). The company generated consolidated net revenue of $116.9mm in fiscal 2018.

Significantly, the company is seeking to reject a “marketing service agreement” and “operational agency agreement” with BP Energy Company ($BP), pursuant to which BP agreed to purchase and receive 100% of the debtors’ nat gas capacity. We gather (see what we did there?) that it’s hard to perform under those agreements when you can’t transport your product: accordingly, BP is listed as the debtors’ largest unsecured creditor at ~$41mm. BP’s rights to setoff and/or recoupment (PETITION Note: Weil Gotshal & Manges LLP just happened to write about these two remedies this week here) will be a major facet of this case: if BP is able to exercise remedies, the debtors ability to operate post-restructuring will be threatened. Per the company:

Docket #17, Rejection Motion.

Docket #17, Rejection Motion.

The privately-held company is owned primarily by affiliates of Goldman Sachs and the Ontario Teachers’ Pension. Absent “holdup value,” we can’t imagine they’ll get any return on their investment given the circumstances.

  • Jurisdiction: D. of Delaware (Judge Shannon)

  • Capital Structure:

  • Professionals:

    • Legal: Davis Polk & Wardwell LLP (Darren Klein, Lara Samet Buchwald, Aryeh Falk, Jonah Peppiatt) & (local) Landis Rath & Cobb (Adam Landis, Kerri Mumford, Kimberly Brown, Holly Smith)

    • Directors: Patrick J. Bartels Jr., Scott Lebovitz, Sebastien Gagnon, Baird Whitehead, Zvi Orvitz, Romeo Leemrijse, Verlyn Holt, Jack Golden, George Dotson, Callum Streeter, Alan Shepard

    • Financial Advisor: Opportune LLC and Dacarba LLC

    • Investment Banker: Evercore Partners

    • Claims Agent: Prime Clerk LLC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Prepetition & DIP Agent: Keybank NA

      • Legal: Hunton Andrews Kurth LLP (Timothy Davidson, Joseph Rovira) & (local) Connolly Gallagher LLP (Jeffrey Wisler)

    • Equityholders: Goldman Sachs & Ontario Teachers’ Pension Plan Board

      • Legal: Wachtell Lipton Rosen & Katz (Richard Mason, Emil Kleinhaus, Michael Cassel) & (local) Drinker Biddle & Reath LLP (Steven Kortanek, Patrick Jackson, Joseph Argentina Jr.)

    • ETC

      • Legal: Akerman LLP (John MItchell, David Parham, Yelena Archiyan) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, TImothy Cairns)

New Chapter 11 Filing - Fieldwood Energy LLC

Fieldwood Energy LLC

  • 2/15/18 Recap: Riverstone Holdings (12% owned by Goldman Sachs) attempted to keep Fieldwood Energy LLC out of bankruptcy back in the beginning of the oil & gas collapse but, alas, it appears the capital structure was too hefty to manage in a continued depressed oil and gas market. Today, the company filed a prepackaged plan of reorganization to slice its debt virtually in half (from $3.26b to $1.6b), implement a $525mm rights offering (use of proceeds = purchase Noble Energy's Gulf of Mexico assets), and secure a $60mm DIP credit facility. Existing RBL lenders will be paid in cash in full; first lien lenders will receive a $1.14b FILO TL and cash; holders of the prepetition FILO facility will receive a share of $518mm second lien term loan and cash; and the second lien lenders and Riverstone will receive 20.25% of the new equity plus rights to purchase the remainder via the rights offering. Translation: Riverstone will still own a significant percentage of this company. More to come...
  • Jurisdiction: S.D. of Texas (Judge Jones)
  • Capital Structure: $3.26b debt     
  • Company Professionals:
    • Legal: Weil Gotshal & Manges LLP (Stephen Karotkin, Ray Schrock, Matthew Barr, Alfredo Perez, Jessica Liou, Daniel Gwen, Patrick Steel)
    • Financial Advisor: Opportune LLP
    • Investment Banker: Evercore Group LLC (David Ying)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Prepetition Reserves-Based Lending Facility Agent: Citibank NA
      • Legal: Willkie Farr & Gallagher LLP (Jennifer Hardy, Ana Alfonso, Debra McElligott)
    • Ad Hoc Group of First Lien Term Loan Lenders
      • Legal: O'Melveny & Myers LLP (George Davis, David Johnson, Evie Whiting and Daniel Shamah) & (local) Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh, Kristhy Peguero, Jennifer Wertz)
    • Prepetition Agent of the Second Lien Term Loan Facility: Cortland Capital Market Services LLC
      • Legal: Davis Polk & Wardwell LLP (Damian S. Schaible, Darren S. Klein, Natasha Tsiouris) & (local) Haynes and Boone LLP (Henry Flores, Kenric Kattner, Kourtney Lyda)
    • Noble Energy, Inc.
      • Legal: Bracewell LLP (William A. Wood III) 
    • Apache Corporation
      • Legal: Andrews Kurth Kenyon LLP (Robin Russell)
    • PE Sponsor
      • Riverstone V FW Holdings Sub LLC
        • Legal: Vinson & Elkins LLP (David Meyer, Jessica Peet)

Updated 4/2/18 (case confirmed)

New Chapter 11 Filing - Knight Energy Holdings LLC

Knight Energy Holdings LLC

  • 8/8/17 Recap: We were starting to sleep on the oil and gas services space. This trainwreck - which had been kicking around for quite a while - is finally in bankruptcy court. We could bore you with the usual details about services companies sucking wind ever since gas prices imploded - what was it? nearly 24 months ago? - but why waste precious space when we can amuse you with stories of drug racketeering instead? After all, "People Make the Difference." Hahaha. Anyway, we guess it's our duty to, in fact, bore you with some more of the mundane restructuring facts so we will once we have more information. For now, we understand that the filing is pursuant to a restructuring support agreement and the debtors seek a multi-draw DIP credit facility of $10mm. More to come.
  • Jurisdiction: W.D. of Louisiana (Judge Summerhays)
  • Capital Structure: $mm debt     
  • Company Professionals:
    • Legal: Heller Draper Patrick Horn & Dabney, LLC (Douglas Draper, William Patrick III, Tristan Manthey, Cherie Nobles)
    • Financial Advisor: Opportune LLP (Gary Pittman)
    • Investment Banker: Bayshore Partners (Michael Turner)
    • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Sponsor: Clearlake Capital Group LP
    • DIP Agent: Cantor Fitzgerald Securities
    • Official Committee of Unsecured Creditors
      • Legal: Baker Donelson Bearman Caldwell & Berkowitz PC (Jan M. Hayden, Edward H. Arnold III, Lacey Rochester, Susan Matthews)

Updated 9/21/17

Chapter 11 Filing - Rooster Energy Ltd.

Rooster Energy Ltd.

  • 6/2/17 Recap: Integrated oil and gas offshore exploration and production company with properties located in the outer continental shelf of Gulf of Mexico filed for bankruptcy because it was an offshore exploration and production company operating in the Gulf of Mexico. 
  • Jurisdiction: W.D. of Louisiana
  • Capital Structure: $53.1mm '18 debt (Angelo Gordon Energy Servicer LLC), $24mm subordinate secured debt (K2 Principal Fund LP)    
  • Company Professionals:
    • Legal: Baker Donelson Bearman Caldwell & Berkowitz PC (Jan Hayden, Edward Arnold III, Lacey Rochester, Susan Mathews, Daniel Ferretti)
    • Financial Advisor: Opportune LLP (Sean Clements)
    • Investment Banker:
    • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Official Committee of Unsecured Creditors (Cochun Properties)
      • Legal: Heller Draper Patrick Horn & Dabney LLC (William Patrick III, Tristan Manthey)
    • Official Committee of Unsecured Creditors (Rooster)
      • Legal: Arent Fox LLP (George Angelich)

New Chapter 11 Filing - Vanguard Natural Resources

Vanguard Natural Resources

  • 2/2/17 Recap: Houston-based oil and gas producer files chapter 11 pursuant to a restructuring support agreement that, if implemented, will permit the company to cut over $700mm of debt. The company has secured a $50mm DIP. 
  • Jurisdiction: SD of Texas
  • Capital Structure: $1.372b '18 L+250 RBL (Citibank N.A.), $76mm '20 7% second lien notes, $51'm '19 8.375% unsecured notes (Wilmington Trust), $382mm '20 7.875% unsecured notes (UMB Bank)    
  • Company Professionals:
    • Legal: Paul Hastings LLP (Chris Dickerson, James Grogan, Todd Schwartz, Alexander Bongartz, Brendan Gage)
    • Financial Advisor: Opportune LLP (Scott Anchin)
    • Investment Banker: Evercore Partners (Daniel Aronson, Marco Acerra)
    • Claims Agent: Prime Clerk (*click on company name for docket)
  • Other Parties in Interest:
    • Ad Hoc Group of 2L noteholders (Fir Tree Inc., Wexford Capital LP, York Capital Management Global Advisors)
      • Legal: Morrison & Foerster LLP (Jonathan Levine, John Pintarelli, Daniel Harris) & (local) Jackson Walker LLP (Monica Blacker, Matthew Cavenaugh)
    • Ad Hoc Committee of Senior Noteholders & UMB Bank NA
      • Legal: Milbank (Dennis Dunne, Andrew LeBlanc, Samuel Khalil) & (local) Porter Hedges LLP (John Higgins, Eric English)
      • Investment Bank: PJT Partners Inc.
    • RBL Lender: Citibank NA
      • Legal: Weil (Stephen Karotkin, Joseph Smolinsky, Blaire Cahn, Christopher Lopez)
    • UMB Bank
      • Legal: Kelley Drye & Warren LLP (Eric Wilson, Benjamin Feder, T. Charlie Liu)
    • Wilmington Trust
      • Legal: Pryor Cashman LLP (Seth Lieberman, Patrick Sibley, Matthew Silverman) & (local) Cole Schotz PC (Michael Warner, Benjamin Wallen)
    • Independent Directors of the Board
      • Legal: Andrews Kurth Kenyon LLP (Robin Russell, Tad Davidson, Joseph Buoni)
    • Unsecured Noteholder & Preferred Unitholder: Panning Capital Management 
      • Legal: Munger Tolles & Olson LLP (Thomas Wolper, Seth Goldman) & (local) Norton Rose Fulbright US LLP (William Greendyke, Jason Boland, Bob Bruner, Louis Strubeck) 
    • Ad Hoc Equity Committee
      • Legal: Gardere Wynne Sewell LLP (John Melko, Sharon Beausoleil, Michael Riordan, Sean Wilson, Holland O'Neil)
    • Official Committee of Unsecured Creditors
      • Legal: Akin Gump (Charles Gibbs, Michael Stamer, Abid Qureshi, Meredith Lahaie, Kevin Zuzolo)
      • Financial Advisor: FTI Consulting

Updated 3/22/17