NBL Noble Energy Inc

By Patrick Fitzgerald 

Fieldwood Energy LLC, one of the largest oil producers in the Gulf of Mexico, sought bankruptcy protection Thursday after agreeing to the terms of a novel deal with investors that calls for a combination of a debt-for-equity swap and the purchase of Noble Energy Inc.'s Gulf-based oil and gas assets.

Fieldwood, which is backed by energy investment firm Riverstone Holdings LLC, filed for chapter 11 in U.S. Bankruptcy Court in Houston with a prepackaged bankruptcy plan that hands control of the reorganized business to a group of junior debt holders, which includes Riverstone, and slashes $1.6 billion in debt off its books.

Riverstone, which pumped nearly $700 million into Fieldwood's equity since founding the company in late 2012, will see its stake greatly reduced under the chapter 11 plan. The New York investment firm will emerge with about 50% of the equity in the reorganized company by swapping debt it owns and injecting new cash, according to a person familiar with the matter.

In addition to its balance-sheet restructuring, Fieldwood's new owners have agreed to pay $480 million in cash for Noble's Gulf drilling fields and the company intends to raise $525 million from an equity rights offering to pay for the purchase.

The debt holders believe that Noble's wells, which are close to Fieldwood's existing operating areas, will boost cash flow while reducing operating costs, according to people familiar with the matter.

Fieldwood will also take on an estimated $230 million in obligations to plug old wells in the offshore fields, Noble said.

Like many Gulf drillers, Fieldwood was jolted when oil prices began to slide back in 2014. However, a few years later, the company was able to sell new debt to a group of institutional investors and use the proceeds to repay its bank lenders.

While U.S. oil prices have rebounded to more than $60 a barrel from their depths of the recent price crash, they remain well below the more than $100 that crude traded for when Fieldwood spent more than $4.4 billion on offshore fields in 2013 and 2014. Natural gas prices, meanwhile, have remained in a prolonged slump.

Despite the upturn in oil prices, Fieldwood was still squeezed for cash and unable to service its debt, according to court papers.

The Houston-based energy company says the restructuring deal has the backing of more than 70% of its senior lenders as well as Riverstone. It has lined up a $60 million bankruptcy loan so that it can continue operating during the bankruptcy process.

The chapter 11 plan, which requires court approval, calls for unsecured creditors to be paid in full. In a prepackaged bankruptcy, a company negotiates with key creditors and solicits votes on its plan before actually filing its chapter 11 petition. Prepacks allow companies to shorten the often costly bankruptcy process.

Fieldwood has hired Weil Gotshal & Manges LLP, Evercore Group LLC and Opportune LLP as its bankruptcy advisers. Senior lenders have hired the law firm O'Melveny & Myers LLP and Houlihan Lokey Capital Inc. as their financial adviser. The case number is 18-30648.

--Ryan Dezember contributed to this article.

Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com

(END) Dow Jones Newswires

February 15, 2018 18:43 ET (23:43 GMT)

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