Whiting Oil and Gas has filed for Chapter 11 bankruptcy in the Southern District of Texas, the company announced Wednesday, April 1.
In a media release, the company says it has more than $585 million of cash on its balance sheet, and will continue to operate its business in the normal course without material disruption to vendors, partners or employees. The company also has sufficient liquidity to meet financial obligations during the restructuring without additional financing.
Whiting said it has reached an agreement in principal with various noteholders to reduce debts coming due in 2020, 2021, 2023, and 2026. The proposed restructuring will be set forth in a forthcoming agreement, which it said will establish a more sustainable capital structure going forward.
The plan, which is subject to approval by the bankruptcy court in Texas, will reduce debts by $2.2 billion through an exchange of all notes for 97 percent of the new equity in the reorganized company, and will also repay in full the company’s revolving credit facility. It will also pay in full all other secured creditors, tax, and other priority claimants and employees.
The company’s existing equity holders will receive 3 percent of the new equity of the reorganized company and warrants.
“In 2019, we took proactive steps to reduce our cost structure and improve our cash flow profile. We continue to build on these actions in 2020,” Whiting’s Chairman, President and CEO Bradley J. Holly said. “The Company has also explored a wide variety of alternatives to address our balance sheet and looming note maturities in a highly capital constrained market environment.
“Given the severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi-Russia oil price war and the COVID-19 pandemic, the Company’s Board of Directors came to the conclusion that the principal terms of the financial restructuring negotiated with our creditors provides the best path forward for the Company. We are pleased to have secured a highly constructive restructuring framework with a critical mass of our noteholders. Through the terms of the proposed restructuring, we believe a right-sized balance sheet will enable us to capitalize on our enhanced cost structure, high-quality asset base and successfully compete in the current environment.”
The bankruptcy follows a series of cost-cutting moves by the company. Last year, Whiting laid off 33 percent of its workforce, or 254 employees, and it dropped a rig and a completion crew.
It was also among the first companies to announce cost-cutting measures amid the OPEC-Russia price war. It reduced capital expenditures by $185 million or 30 percent, and said it would drop another rig and completion crew.
Whiting is an independent oil and gas company with holdings primarily in the Bakken and Three Forks plays in North Dakota. It also has some assets in the Niobrara play in northeast Colorado.
In 2014, Whiting purchased Kodiak Oil & Gas for $3.8 billion, making it North Dakota’s largest producer — and saddling it with huge debts.
It also purchased 55,000 net acres from Oasis Petroleum in 2018 for $130 million. That property, the Foreman Butte, has shown promise with early test wells, but constrained capacity in that area forced the company to shift its attention to other assets.
Whiting has established a hotline for inquiries about the restructuring with the company’s noticing agent, Stretto. That number is 1-800-330-2531. There is also a website, cases.stretto.com/whitingpetroleum.
Moelis & Company is acting as a financial advisor for the company, Kirkland & Ellis is acting as legal advisor, Alvarez and Marsal as restructuring advisor, and Jeffrey S. Stein of Stein Advisors is the Company’s Chief Restructuring Officer.
PJT Partners is financial advisor for the Consenting Noteholders and Paul, Weiss, Rifkind, Wharton & Garrison is acting as legal advisor.
Holly thanked everyone who has helped the company during this time.
“I want to express my gratitude to the employees for their continued dedication and hard work, and to our service providers and business partners for their ongoing support during this time,” he said. “Following the restructuring process, we look forward to having substantially less debt and a significantly improved outlook for our Company and its stakeholders.”