SandRidge Energy Files for Bankruptcy Protection -- 2nd Update
May 16 2016 - 6:55PM
Dow Jones News
By Patrick Fitzgerald
SandRidge Energy Inc. became the latest victim of the prolonged
downturn in energy sector, filing for bankruptcy protection Monday
after reaching a deal with its creditors to swap $3.7 billion in
debt for control of the oil and gas company.
The Oklahoma City company filed for chapter 11 protection in
U.S. Bankruptcy Court in Houston after reaching a deal with the
majority of its lenders and bondholders on the terms of a
"prearranged" debt-restructuring pact.
SandRidge Chief Executive James Bennett said the proposed debt
swap, which requires court approval, would allow the reorganized
company to concentrate on oil and gas exploration and development
in the company's active Oklahoma and Colorado project areas.
The company will stay open during the chapter 11 case and
expects to exit bankruptcy "with minimal disruption to our
business," Mr. Bennett said.
SandRidge says it has enough cash to fund its continuing
operations without a bankruptcy loan. Among its initial bankruptcy
request is the authority to pay operating expenses associated with
production activities, royalties and wages to its workers. The
company also intends to pay all suppliers and vendors in full
during the bankruptcy.
SandRidge was founded in 2006 by Tom Ward, who had co-founded
Chesapeake Energy Corp. with Aubrey McClendon, who died in March,
in 1989. After leaving Chesapeake, Mr. Ward paid $500 million to
take control of a natural-gas producer, which he renamed SandRidge
and built into a leading shale producer with a market
capitalization of more than $11 billion,
But the company stumbled during the financial crisis and
struggled to recover. Activist investors replaced Mr. Ward a few
years ago and installed Mr. Bennett as CEO. TPG-Axon Capital
Management LP, which led the campaign to oust Mr. Ward, and Mount
Kellett Capital Management LP each lost more than $150 million in
the company's decline as did veteran Canadian investor Prem Watsa,
according to securities filings.
Under Mr. Bennett's leadership, the company sold the Gulf
drilling fields back to one of the private-equity firms from which
it had bought them. It received just over half the price it had
paid about two years earlier.
SandRidge joins the ranks of oil and gas drillers to file for
bankruptcy in recent weeks as low oil prices continue to roil the
energy sector. Linn Energy, Midstates Petroleum Co. and Ultra
Petroleum Corp. have all recently filed for bankruptcy in Texas.
Also, Breitburn Energy Partners LP filed for bankruptcy Monday in
New York.
Those companies join Samson Resources Corp., Magnum Hunter
Resources Corp., Emerald Oil Inc., Swift Energy Co., and dozens
more that had earlier sought bankruptcy.
More than 70 North American exploration-and-production companies
have filed for bankruptcy protection since the beginning of 2015,
based on data from law firm Haynes and Boone LP.
Additional energy companies may follow suit. Exco Resources Inc.
said Friday that it hired advisers and formed a committee to
explore alternatives, including seeking bankruptcy protection.
Separately, a subsidiary of American Energy Partners LP, the
Oklahoma City oil and gas company founded by Mr. McClendon after he
was ousted by activist investors, has defaulted on a $450 million
loan after the executive's death, according to people familiar with
the situation.
Representatives for Exco and American Energy Monday couldn't
immediately be reached for comment.
SandRidge drills for oil and gas in Oklahoma, Kansas and Texas,
where it has 4,411 gross producing wells and more than 2 million
gross acres under lease. As of Dec. 31, it had four rigs in
operation.
At the end of last year, the company employed more than 1,100
people but has since reduced its head count to 657, according to
court papers. The company listed assets of $7 billion and debts of
about $4 billion in its chapter 11 petition filed with the
bankruptcy court.
The law firm Kirkland & Ellis LLP is handling the chapter 11
case, and Houlihan Lokey, Inc. is SandRidge's financial
adviser.
Sandridge's case number is 16-32488. U.S. Bankruptcy Judge
Marvin Isgur has been assigned the case, and an initial hearing is
slated for Wednesday afternoon in Houston.
--Stephanie Gleason, Shasha Dai, and Ryan Dezember contributed
to this article
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
May 16, 2016 18:40 ET (22:40 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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