BX Blackstone Inc

By Alexander Gladstone and Andrew Scurria 

Some distressed energy companies are wasting no time in skipping debt payments as their business models come under siege, conserving precious cash as they plot ways to survive a historic fall in crude prices.

Sable Permian Resources LLC missed a coupon payment due Wednesday to bondholders holding securities that mature in 2024, according to people familiar with the matter. Blackstone Group Inc.'s Gavilan Resources LLC also skipped a payment to creditors, other people familiar with the matter said.

Representatives for Sable and Gavilan didn't respond to requests for comment.

Preserving liquidity is the top priority in the oil patch now that companies are bleeding cash after the collapse in crude prices. The main oil benchmarks have lost roughly half their value so far this year, despite rebounding this week on hopes of a truce in the Saudi-Russian price war that flooded global crude markets.

Oil producers and service contractors have been drawing down their credit lines, slashing budgets and idling equipment to save money. Banks and bondholders are bracing for missed debt payments to come next.

After drawing down $650 million on a credit facility, Whiting Petroleum Corp. filed for bankruptcy on Wednesday rather than pay $262 million that came due to creditors. The company said it couldn't take the risk of paying when its bank credit was likely to be reduced.

Gavilan, which Blackstone formed in 2017, operates in the Eagle Ford shale in South Texas. The company is preparing for a debt restructuring strategy that could involve filing for chapter 11 protection. Lenders have engaged the law firm Fried Frank Harris Shriver & Jacobson LLP and investment bank Houlihan Lokey Inc. to advise on negotiations, people familiar with the matter said. Gavilan's advisers include investment bank Lazard Ltd. and law firm Weil Gotshal & Manges LLP.

Sable, founded by the late shale drilling pioneer Aubrey McClendon, drills in the Permian Basin in West Texas. The company, backed by OnyxPoint Global Management and Energy & Minerals Group, was able to restructure about $2.1 billion of debt in October in an out-of-court deal. But five months later, investors who received new bonds as part of the restructuring deal aren't being paid interest.

Several other distressed energy companies, however, did make good on their debt service obligations this week, averting an imminent restructuring. Both Callon Petroleum Corp. and Chesapeake Energy Corp. paid bond coupons that were due on Wednesday.

Write to Alexander Gladstone at alexander.gladstone@wsj.com and Andrew Scurria at Andrew.Scurria@wsj.com

(END) Dow Jones Newswires

April 03, 2020 16:40 ET (20:40 GMT)

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