U.S.-based oil field services provider Seventy Seven Energy Inc. filed for a pre-packaged bankruptcy with $1.1bn of debt amid depressed oil prices.
Under the terms of the restructuring plan, the company’s 2019 unsecured bondholders will receive at least 96.75% of the restructured company’s equity in exchange for debt of $650m.
A second group of bondholders are slated to get a 3.25% equity stake plus warrants for 15% of the new common stock if they vote to support the plan.
The company’s term-loan lenders will receive a 2% payout of their loan upfront and a better collateral package securing the remaining loan, which will be carried over.
The incremental term-loan lenders will be paid at least $15m upfront, and the remaining $84m balance of its loan will remain in place.
Additionally, current equity holders will receive warrants for 20% of new common stock if all the debtholders vote for the plan.
Seventy Seven said its trade creditors, suppliers and contractors will be paid in the ordinary course of business.
The company’s lenders, led by Wells Fargo, have agreed to provide $100m in financing to fund the chapter 11 case, which Seventy Seven hopes to complete within 60 days.
Previously, the company had raised the possibility of bankruptcy in a February 2016 regulatory filing and hired advisers from Lazard to help it restructure its business.
The law firm Baker Botts is handling the company’s chapter 11 case, and the company has hired Alvarez & Marsal as its restructuring adviser. The case number is 16-11409 and Judge Laurie Selber Silverstein has been assigned the case.
Key takeaways of the updates on Pacific Exploration’s restructuring plan:
- $500m debtor-in-possession financing to be provided as part of restructuring transaction
- Gained court approval of consensual resolution with IFC of stay of extension of proceedings
- Company would be able to continue paying all of suppliers, trade partners and contractors of subsidiaries across jurisdictions
- Restructuring transaction aims to reduce debt and improve its liquidity
- The superior court of Ontario approved an extension of stay of proceedings until 26 August 2016
According Kazakhstan’s energy minister Kanat Bozumbayev, a consortium led by Chevron Corp. plans on investing up to $37bn in the country’s oil fields with Chevron’s CEO John Watson having previously discussed the project with the country’s political leaders.
Investment in the project is expected to commence during 2017 and the project would add up to 24,000 jobs in the country.
Chevron is the biggest partner in the field’s operator, Tengizchevroil, with a 50% stake. Other shareholders in the operator include Exxon Mobil Corp. with a 25% stake, Kazakhstan’s state-controlled oil company Kazmunaigas owns 20% and Lukarco, a company controlled by Russia’s Lukoil, owns the remaining 5% in the operating company.
Chevron would separately announce the consortium’s final investment decision on the project in consultation with its partners.
Output at the Tengiz oil field is currently about 500,000 barrels a day. Chevron plans to increase annual production to about 760,000 barrels a day by 2021, but the company had previously delayed investments amid the crude oil price slump.
Chevron has estimated that it would spend between $17 – 22bn annually over the next two years on capital projects; down from this year’s $25 – $28bn budget for such developments.
Royal Dutch Shell Plc plans to cut 2,200 more jobs to take its tally of job cuts to 12,500 in 2016.
According to Paul Goodfellow, Shell’s vice president for the U.K. and Ireland, at least 5,000 jobs would be cut in 2016 to tackle lower crude oil prices and as a result of its acquisition of BG Group Plc earlier this year.
Shell’s adjusted net income for 1Q 2016 declined 58% to $1.6bn following the collapse in oil prices. The company acquired BG Group for $54bn in 2016 to get access to oil and natural gas reserves from Australia to Brazil. The acquisition increased Shell’s debt to $70bn as on 31 March 2016.
North Dakota-based shale gas company Intervention Energy Holdings LLC filed for bankruptcy protection on Friday amid a brewing battle with lender EIG Global Energy Partners.
According to company chief executive and founder, John Zimmerman, EIG was a “cooperative partner” for the majority of its time as Intervention Energy’s lender but its position had clearly changed once they had decided to build up their competing platform.”
Intervention had a $200m senior secured note from EIG in 2012, which it used to finance well development costs. As per court documents, Intervention owed EIG about $140m.
The relationship between the two began to strain when Intervention defaulted on its debt in June 2015. The parties entered into a forbearance agreement post the default, during which an equity infusion was sought and an investment bank, Evercore, was hired to look at the sale of the company.
During the sale process, Intervention managed to attract three bidders, all of which were rejected by EIG, in March 2016, as EIG intended to let the forbearance agreement expire.
Post-expiry of the forbearance agreement, a foreclosure could have led to EIG seizing the company’s assets and selling it to another company it was in talks with.
Before filing for bankruptcy, the company had reinvested $76m free cash back into the company and EIG had made an equity infusion of about $32m.
The Kingdom of Saudi Arabia plans on issuing debt in the international markets later in 2016 to stem the sharp decline in foreign exchange reserves, following a depressed crude oil market.
A number of banks have been asked to indicate their terms on raising the sovereign debt issuance.
The size and maturity of Saudi Arabia’s first international bond has not been disclosed publicly, but according to credit analysts at two European banks, the kingdom may borrow at rates about 200 basis points above equivalent US Treasury bonds.
Previously, in April 2016, the kingdom raised a $10bn, 5-year loan from banks including JPMorgan, HSBC and Bank of Tokyo-Mitsubishi in a deal that was several times subscribed and allowed the government to increase the sum borrowed.
The loan is seen as a first step towards sovereign bond issuance and Saudi officials have said that the kingdom could increase debt levels from less than 7% of gross domestic product in 2015 to 50% of GDP by 2020.
Saudi Arabia’s debt plans come as falling oil prices encourage other Gulf countries, including Abu Dhabi and Oman, to turn to capital markets for funding.
Separetely, Saudi Arabia’s credit rating has been downgraded by all three big global rating agencies this year.