⛽️New Chapter 11 Bankruptcy Filing - Fairway Energy LP⛽️

Fairway Energy LP

November 26, 2018

Belligerent week for companies attached to the oil and gas space (see also Waypoint Leasing). Here, Houston-based Fairway Energy LP, which, interestingly (and somewhat oddly), is 28%-owned by the President and Fellows of Harvard College (🤔), is a storage provider for third-party companies engaged in the production, distribution and marketing of crude oil; it is also now in bankruptcy down in the District of Delaware.

Specifically, the company provides undersurface salt cavern storage, storage that has been utilized since the 40s because of its “extremely low risk of leakage through self-sealing under cavern operating pressures.” The company began construction on its 10-million barrel underground storage facility (the “Facility”) in 2015 (rough timing); yet, it has exclusive rights to store in the facility and has otherwise secured the necessary leases to operate in its geographic location. It is also connected to customers via owned and third-party pipeline systems, which enable to the company to take inbound capacity from the (hot) Permian Basin, the Eagle Ford Shale Basin, and Canada/Midcontinent. The pipelines also connect to hubs that connect to “downstream” infrastructure, i.e., refiners, etc.

To get off the ground, the company had a $390mm equity infusion and $80mm in term loans from Riverstone Credit Partners LP. The company has been operating off of credit agreement amendments now for months, however, given operational and market issues that impeded their use of the Facility and hampered liquidity. Per the company:

For the nine (9) months ended September 30, 2018, Fairway had an operating loss of $38,600,000 (before interest, expense, and other income). Fairway’s financial performance has been negatively affected by (i) reduced and delayed demand for its services, (ii) cost overruns on the Facility, (iii) commercial restrictions on accessing the Facility by existing pipeline connections, and (iv) general market conditions that undermine the demand for crude oil storage.

In other words, a perfect storm posing all sorts of headwinds. These winds, it seems, chilled any potential buyer interest in the Facility: pre-petition efforts to find a buyer, including a stalking horse buyer, proved futile. It seems all of the hopeful and flowery language deployed by the company’s professionals in the First Day Declaration about the usefulness of the Facility isn’t a sentiment shared by any prospective purchasers. Was this whole project a solution in search of a problem? Via the bankruptcy sale process, we’ll soon find out. So, will Riverstone (which is also providing a $20mm DIP credit facility) and the writers of the $390mm of equity checks (read: Harvard).

  • Jurisdiction: D. of Delaware

  • Capital Structure: $94mm debt     

  • Company Professionals:

    • Legal: Haynes and Boone LLP (Patrick Hughes, Martha Wyrick, Kelsey Zottnick) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Kenneth Enos, Elizabeth Justison)

    • Financial Advisor: Alvarez & Marsal North America LLC (Gary Barton, Kevin Larin)

    • Investment Banker: Piper Jaffray & Co./Simmons & Company International

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

  • Other Parties in Interest:

    • Administrative Agent under Secured Term Loan Credit Agreement & DIP Lender/Agent: Riverstone Credit Partners LP

      • Legal: White & Case LLP (David Turetsky, Andrew Zatz) & (local) Fox Rothschild LLP (Jeffrey Schlerf)

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 Bankruptcy - Cobalt International Energy Inc. ($CIE)

Cobalt International Energy Inc.

  • 12/13/17 Recap: Houston-based publicly-traded ($CIE) deepwater exploration and production company operating in the U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa has filed for bankruptcy. The company blames "a failed sale of Cobalt’s Angolan assets and the related litigation, the prolonged downturn in the exploration and production industry, and nearly $3.0 billion of funded indebtedness" for its filing. The company seeks a sale in bankruptcy. Other than the failed 2016 Angolan transaction, this story is pretty similar to other E&P bankruptcies we've seen in the past. Upshot: offshore exploration is expensive and with oil in the high 50s (a relatively high number), the economics aren't there to support the capital structure. 
  • Jurisdiction: S.D. of Texas (Judge Isgur)
  • Capital Structure: $500mm '21 first lien notes (Wilmington Trust NA), $934.7mm '23 second lien notes (Wilmington Trust NA), $619.2mm '19 2.625% unsecured notes (Wells Fargo Bank NA), 3.125% $786.9mm '24 unsecured notes (Wells Fargo Bank NA)
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (James Sprayragen, Marc Kieselstein, Chad Husnick, Brad Weiland, Laura Krucks, Gabor Balassa, Stacy Pepper) & (local) Zach A. Clement PLLC (Zach Clement)
    • Investment Banker: Houlihan Lokey Capital
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Group of First Lien Notes
      • Legal: Weil Gotshal & Manges LLP (Matt Barr)
    • Ad Hoc Group of Second Lien Notes
      • Legal: Akin Gump Strauss Hauer & Feld LLP (James Savin)
    • First Lien Indenture
      • Legal: Wilmer Cutler Pickering Hale & Dorr LLP (Andrew Goldman)
    • Significant Equityholders: First Reserve GP XI Inc., The Carlyle Group, Riverstone Holdings LLC, Paulson & Co., Hotchkis and Wiley Capital Management LLC

New Chapter 11 Filing - Castex Energy Partners LP

Castex Energy Partners LP

  • 10/17/17 Recap: People have been saying that there is still more oil and gas distress to work its way through the system, particularly offshore-related companies. Well, here, Castex Energy Partners LP, a Houston-based onshore and offshore oil and natural gas exploration and production company located primarily on the coasts of Louisiana and Texas filed for bankruptcy to effectuate a restructuring support agreement with its major parties in interest. The company owns interests in approximately 375 wells (predominantly onshore); it also holds interests in certain seismic interests and specific lands. Like most other oil and gas E&P companies, Castex faced "intense financial pressure" due to the decrease in price of oil and gas and consequent decrease in demand for drilling. The company's EBITDA declined 70% from 2014 to 2016. Yes, you read that right: 70%. Of course, it didn't help that the company made an inopportune decision to invest heavily in offshore development in 2014, outlaying $259mm "in anticipation of future developmental drilling." Timing couldn't have been worse, it seems. Also, the company simply forgot to hedge, apparently; it "was mildly hedged and was exposed to [a massive nat gas] drop." Given all of that, the playbook is pretty un-extraordinary: strapped with a nice chunk of bank debt, the company attempted to make operational cuts to help sustain cash flow while simultaneously running a sales process through Evercore Partners Inc. That process failed. So, now, the company has $4mm of cash on hand and a $15mm DIP credit facility commitment from its prepetition lenders and a restructuring support agreement between it, Capital One Bank, Castex Energy Inc., and the RBL Lenders. The company plans to equitize certain prepetition lenders' debt and emerge from bankruptcy in Q1 of '18. 
  • Jurisdiction: S.D. of Texas (Judge Isgur)
  • Capital Structure: $400mm debt (Capital One Bank (USA) NA)    
  • Company Professionals:
    • Legal: Kelly Hart & Pitre LLP (Louis Phillips, Peter Kopfinger, Amelia Bueche, Patrick Shelby)
    • Restructuring Advisor: Alvarez & Marsal LLC (Ryan Omohundro)
    • Financial Advisor: Evercore Partners Inc.
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Castex Energy Inc.
      • Legal: Norton Rose Fulbright LLP (Kristian Gluck, Gregory Wilkes, Shivani Shah)
    • Prepetition & DIP Admin Agent: Capital One Bank (USA) NA & Consenting Lenders (Amegy Bank, Whitney Bank, IberiaBank, Frost Bank, Cross Ocean, Comerica Bank, Citibank NA, Bank of America Credit Products Inc., Capital One NA)
      • Legal: O'Melveny & Myers LLP (George Davis, Michael Lotito, Daniel Shamah) & (local) Porter Hedges LLP (John Higgins, Amy Geise)
      • Financial Advisor: RPA Advisors LLC
    • Riverstone V Castex 2005 Intermediate Holdings LLC
      • Legal: Vinson & Elkins LLP (Bradley Foxman, Paul Heath)

Updated 10/26/17