Three oil and gas companies reached deals with creditors to quickly slash hundreds of millions of dollars of debt in chapter 11 so that they will be ready when energy prices recover, the Wall Street Journal reported today. Houston-based oil-well servicer Key Energy Services Inc. yesterday filed for chapter 11 protection, and Basic Energy Services Inc. of Fort Worth, also an oil-well servicer, said it would do so by today. Meanwhile, oil and gas producer Stone Energy Corp. said that continuing negotiations has yielded a plan to file for chapter 11 protection by Dec. 9 to finalize a restructuring deal. To confront the aftershocks of the commodities rout, they are filing pre-packaged chapter 11 bankruptcies. John Penn, a Dallas-based restructuring partner at Perkins Coie LLP who isn’t involved in these cases, said that pre-packaged bankruptcies can be especially helpful to oil and gas servicers whose survival depends on reassuring customers that they will remain viable business partners. Companies that have recently taken advantage of the ability to file a prepackaged bankruptcy include Global Geophysical Services LLC, a seismic-data provider for the oil industry, which was in and out of chapter 11 protection in two months. Oil and gas producers Atlas Resource Partners LP and Halcón Resources Corp. filed prepackaged bankruptcies on July 27; Atlas emerged from chapter 11 on Sept. 1, and Halcón followed on Sept. 9. Key Energy’s restructuring plan proposes to cut its $1 billion in liabilities to about $250 million so the roughly 2,900-employee company can emerge from chapter 11 with a “manageable debt load.” Read more. (Subscription required.)
Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. Order your copy of ABI's revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition.