Item 1.01 – Entry into a Material Definitive Agreement
Restructuring Support Agreement
On September 29, 2020, Oasis Petroleum Inc. (the “Company”) and certain of the Company’s wholly owned direct and indirect affiliates (collectively, “Oasis”) entered into a Restructuring Support Agreement (the “RSA”) with (i) certain of the lenders party to that certain Third Amended and Restated Credit Agreement (the “RBL Credit Agreement”), dated as of October 16, 2018, as amended through the Fourth Amendment dated April 24, 2020, by and among the Company, as parent, Oasis Petroleum North America LLC, as borrower, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent (collectively, the “Consenting RBL Lenders”) and (ii) certain holders (collectively, the “Consenting Noteholders” and, together with the Consenting RBL Lenders, the “Consenting Stakeholders”) of the Company’s (a) 6.50% Senior Unsecured Notes due 2021, issued under the First Supplemental Indenture, dated as of November 10, 2011, (b) 6.875% Senior Unsecured Notes due 2022, issued under the Fourth Supplemental Indenture, dated as of September 24, 2013, (c) 2.625% Senior Unsecured Convertible Notes due 2023, issued under the Sixth Supplemental Indenture, dated as of September 19, 2016, (d) the 6.875% Senior Unsecured Notes due 2023, issued under the Second Supplemental Indenture, dated as of July 2, 2012 and (e) 6.25% Senior Unsecured Notes due 2026, issued under the Indenture, dated as of May 14, 2018 (collectively, the “Notes”), each by and among the Company, certain of its affiliates and U.S. Bank National Association as Trustee. Capitalized terms used under this heading titled “Restructuring Support Agreement” but not otherwise defined herein shall have the meaning given to such terms in the RSA.
The RSA provides for certain milestones requiring, among other things, that Oasis (i) commences solicitation of votes to accept or reject the Plan (as defined below) no later than September 30, 2020; (ii) commences the Chapter 11 Cases no later than September 30, 2020 (the “Petition Date”); (iii) obtains entry of an order by the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) approving the DIP Facility (as defined below) on an interim basis no later than three (3) Business Days after the Petition Date; (iv) files with the Bankruptcy Court the Plan and corresponding disclosure statement (the “Disclosure Statement”) no later than thirty (30) calendar days after the Petition Date; (v) files with the Bankruptcy Court a motion to establish a bar date for filing proofs of claim, provided that such requirement shall not apply in the event Oasis commences the Chapter 11 Cases on a “prepackaged” basis by commencing solicitation of the Plan prior to the Petition Date (a “Prepackaged Case”); (vi) obtains entry of an order by the Bankruptcy Court approving the DIP Facility on a final basis no later than thirty (30) calendar days after the Petition Date, provided that (a) such date shall automatically be extended to forty (40) calendar days after the Petition Date in the event Oasis commences a Prepackaged Case; and (b) in no event shall such date be later than immediately preceding the hearing on confirmation of the Plan; (vii) obtains entry of an order by the Bankruptcy Court approving the Disclosure Statement no later than sixty-five (65) calendar days after the Petition Date; (viii) obtains entry of an order by the Bankruptcy Court confirming the Plan (the “Confirmation Order”) no later than one hundred ten (110) calendar days after the Petition Date; and (ix) causes the Plan to become effective no later than December 20, 2020.
The RSA contains certain covenants on the part of each of Oasis and the Consenting Stakeholders, including commitments by the Consenting Stakeholders to vote in favor of the Plan and commitments of Oasis and the Consenting Stakeholders to negotiate in good faith to finalize the documents and agreements governing the Restructuring. The RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including without limitation, the failure to achieve certain milestones and certain breaches by the parties under the RSA.
Although Oasis intends to pursue the restructuring in accordance with the terms set forth in the RSA, there can be no assurance that Oasis will be successful in completing a restructuring or any other similar transaction on the terms set forth in the RSA, on different terms or at all.
A copy of the RSA (and the Annexes thereto) are attached hereto as Exhibit 10.1 to this Current Report on Form 8-K and are incorporated by reference herein. The foregoing description of the RSA is only a summary, does not purport to be complete and is qualified in its entirety by reference to the RSA.
Proposed Joint Prepackaged Chapter 11 Plan of Reorganization
As of September 29, 2020, 100% of the Consenting RBL Lenders, holding approximately 97% of the RBL Claims, and Consenting Noteholders holding approximately 52% of the Notes Claims, signed the RSA, which contemplates a restructuring (the “Restructuring”) of Oasis pursuant to a prepackaged joint plan of reorganization (the “Plan”) under which the Oasis entities will file petitions for voluntary relief under chapter 11 (the “Chapter 11 Cases”) of the Bankruptcy Court. Capitalized terms used under this heading titled “Proposed Joint Prepackaged Chapter 11 Plan of Reorganization” but not otherwise defined herein shall have the meaning given to such terms in the Plan.
Below is a summary of the treatment that the stakeholders of the Company would receive under the Plan:
•each holder of an Allowed Other Secured Claim shall receive, at the option of the applicable Debtor and in its sole discretion: (a) payment in full in Cash of its Allowed Other Secured Claim; (b) the collateral securing its Allowed Other Secured Claim; (c) Reinstatement of its Allowed Other Secured Claim; or (d) such other treatment rendering its Allowed Other Secured Claim unimpaired in accordance with section 1124 of the Bankruptcy Code;
•each holder of an Allowed Other Priority Claim shall receive treatment in a manner consistent with section 1129(a)(9) of the Bankruptcy Code;
•each holder of an Allowed RBL Claim (i) electing to participate in the Exit Facility by entry into the Exit Facility Commitment Letter will receive, (x) on a dollar-for-dollar basis in exchange for the portion of its RBL Claim representing the principal of the loans owed to such lender under the RBL Credit Agreement, an equal amount of the principal of the revolving loans under the Exit Facility as of the Effective Date, upon the terms and conditions set forth in the Exit Facility Term Sheet and (y) with respect to any other portion of such holder’s RBL Claim (to the extent not already paid prior to the Effective Date, including as adequate protection pursuant to the DIP Orders), cash in an amount equal to such portion of such holder’s RBL Claim, and (ii) not electing to participate in the Exit Facility by electing not to sign the Exit Facility Commitment Letter (x) shall be deemed to have funded a Second Out Term Loan on a dollar-for-dollar basis in exchange for the portion of its RBL Claim representing the principal of the loans owed to such lender, and any of such holder’s specified default interest and any unreimbursed claims for professional fees and expenses under the RBL Credit Agreement and (y) with respect to any other portion of such holder’s RBL Claim (to the extent not already paid prior to the Plan Effective Date, including as adequate protection pursuant to the DIP Orders), cash in an amount equal to such portion of such holder’s RBL Claim. The Liens securing the loans under the RBL Credit Agreement shall be retained and deemed assigned to the administrative agent under the Exit Facility to secure the Exit Facility upon the Plan Effective Date. Notwithstanding the foregoing, on the Effective Date, any Specified Default Interest shall be discharged, released, and deemed waived by all Consenting RBL Lenders;
•each holder of an Allowed Notes Claim or an Allowed Mirada Claim shall receive its Pro Rata share (calculated based on the aggregate amount of all Allowed Notes Claims and Allowed Mirada Claims) of 100% of the New Common Stock, subject to dilution on account of the Management Incentive Plan and the New Warrants; provided, that notwithstanding that the Mirada Claims are classified as Class 4 Claims, such claims, in lieu of any treatment as Class 4 Claims, shall be treated in accordance with the Mirada Settlement Agreement;
•each holder of an Allowed General Unsecured Claim shall receive, at the option of the applicable Debtor: (a) payment in full in Cash; or (b) Reinstatement;
•each Allowed Intercompany Claim shall be, at the option of the applicable Debtor, either: (a) Reinstated; or (b) canceled, released, and extinguished and without any distribution at the Debtors’ election and in their sole discretion;
•each holder of an Interest other than in Debtors shall have such interests, at the option of the applicable Debtor, either: (a) Reinstated; or (b) canceled, released, and extinguished and without any distribution at the Debtors’ election and in their sole discretion; and
•each holder of an Interest in Oasis shall receive its Pro Rata share of the New Warrants.
The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.
DIP Facility
Under the RSA, the Consenting RBL Lenders agreed to provide the Company and certain of its subsidiaries with a senior secured superpriority debtor-in-possession revolving credit facility in an aggregate principal amount of $450 million (the “DIP Facility”) consisting of (a) an $150 million new money revolving facility, which includes an amount of $100 million in the form of a letter of credit facility and (b) up to $300 million of the RBL Credit Agreement indebtedness and other obligations that will be deemed to be refinanced as post-petition secured indebtedness under the DIP Facility. Certain terms and conditions of the DIP Facility are set forth in the DIP term sheet attached to that certain commitment letter, attached hereto as Exhibit 10.2 (the “DIP Commitment Letter”), entered into by and among the Company and certain of the Consenting RBL Lenders and/or their affiliates. The proceeds of the DIP Facility may only be used strictly in accordance with the 13-week cash flow budget (subject to certain permitted variances from the budget), which will be required to be updated at certain intervals pursuant to the DIP Facility.
The foregoing description of the DIP Facility does not purport to be complete and is qualified in its entirety by reference to the final, executed documents memorializing the DIP Facility.
Exit Financing
On September 29, 2020, prior to the commencement of the Chapter 11 Cases, the Company entered into that certain commitment letter, attached hereto as Exhibit 10.3 (the “Exit Commitment Letter”), with the Consenting RBL Lenders and/or their affiliates, which is subject to the satisfaction of certain customary conditions, including the approval of the Bankruptcy Court. In addition, as part of the RSA, the Consenting RBL Lenders and/or their affiliates have agreed to provide, on a committed basis, the Company with the Exit Facility on the terms set forth in the exit term sheet attached to the RSA (the “Exit Facility Term Sheet”). The Exit Facility Term Sheet provides for, among other things a post-emergence financing that is intended to mature in 3.5 years from the closing date of the Exit Facility, in the form of a new money senior secured reserve-based revolving credit facility in an aggregate maximum principal amount of up to $1.5 billion with an initial borrowing base and elected commitments amount of up to $575 million (less the amount of any term loan deemed funded by any RBL Lender that is not a Consenting RBL Lender) (the “Exit Facility”), subject to an initial borrowing base redetermination at the closing of the Exit Facility. Any loans drawn under the Exit Facility will be non-amortizing.
The effectiveness of the Exit Facility will be subject to customary closing conditions, including consummation of the Plan. The foregoing description of the Exit Facility Term Sheet does not purport to be complete and is qualified in its entirety by reference to the final, executed documents memorializing the Exit Facility, to be included in a supplement to the Plan to be filed with the Bankruptcy Court.
Item 1.03 – Bankruptcy or Receivership
Chapter 11 Filing
On September 30, 2020, Oasis filed the Chapter 11 Cases under the Bankruptcy Code in the Bankruptcy Court. The Company has filed a motion with the Bankruptcy Court seeking joint administration of the Chapter 11 Cases under the caption In re Oasis Petroleum Inc., et al.
The Company will continue to operate its business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Plan and requested first day relief anticipate that vendors and other unsecured creditors who continue to work with the Company on existing terms will be paid in full and in the ordinary course of business. All existing customer and vendor contracts are expected to remain in place and be serviced in the ordinary course of business.