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(Bloomberg) – Gulfport Energy Corp. filed for bankruptcy, joining scores of U.S. oil and gas companies collapsing after the pandemic intensified their fight against low prices and excessive debt.
The Oklahoma City-based natural gas company filed a Chapter 11 petition on November 13 in U.S. bankruptcy court in Houston, reporting an estimated liability of $ 2.5 billion as of September 30. In a statement released on Saturday, the company detailed a restructuring plan whereby it expects to reduce debt by about $ 1.25 billion.
“We plan to exit the Chapter 11 process with less than twice the leverage and quickly remove it afterwards,” said CEO David M. Wood. “These improvements will significantly improve our ability to generate cash flow and value for our stakeholders in the future.”
Gulfport, which produces gas from fields in Ohio and Oklahoma, was struggling to stay afloat even before Covid-19, after a series of acquisitions over the past decade left too much in debt to survive the energy rout. Following pressure from activist investor Firefly Value Partners to change its board of directors, the company warned on Aug. 7 that it may not be able to stay in business if it does not refinance its debt.
Many investors have avoided producers operating outside of the Permian Basin of West Texas and New Mexico, America’s most prolific oil area, amid growing doubts about their ability to generate returns. BlackRock Inc., at 12.9%, is the largest controller of the voting shares in Gulfport.
No more problems
The Scoop Shale Zone in Oklahoma, one of the areas where Gulfport has purchased assets, has gone from an exploration hot spot a few years ago to an area of little significance after its geology receded. was found to be too difficult. Only a few drilling rigs remain in the state, up from more than 200 in 2014, according to data from Baker Hughes.
Further hurdles emerged when the coronavirus caused widespread lockdowns that decimated global demand for fuels. More than 230 oil and gas explorers have filed for bankruptcy since 2015, with a total debt of more than $ 150 billion, according to a July report by law firm Haynes and Boone.
Gulfport’s ability to reject gas transmission service agreements with bankrupt Rockies Express Pipeline LLC may be limited after the Federal Energy Regulatory Commission recently declared them in the public interest.
The largest unsecured creditor is UBM Financial Corp., which holds about $ 1.8 billion in notes maturing between 2023 and 2026, according to the filing.
Restructuring plan
As part of the restructuring agreement, the Company will issue $ 550 million of new senior unsecured notes to existing unsecured creditors of certain of its subsidiaries.
Gulfport has also secured $ 262.5 million in financing from debtors in the possession of its existing lenders under its revolving credit facility, including $ 105 million in fresh money which will be available upon court approval.
Existing lenders have pledged to provide exit funding of $ 580 million when the company exits Chapter 11, Gulfport said.
The shares, which were trading up to $ 3.38 in December 2019, were worth around 24 cents at the time of the company’s Chapter 11 filing.
The case is in re Gulfport Energy Corp., 20-35562, US Bankruptcy Court, Southern District of Texas.
(Add CEO comment in third paragraph, details of 10th restructuring plan.)
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