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Wednesday, April 20, 2016

Seventy Seven Energy Going Bankrupt; Stone Energy Could Be Next

From Fuel Fix:
U.S. rig contractor Seventy Seven Energy plans to file court papers for Chapter 11 bankruptcy protection next month with a prepackaged deal with creditors in hand, the company said Tuesday. 
Seventy Seven’s agreement with lenders would wipe debt off its books by turning $1.1 billion in debt into equity and the company would operate as normal. It said job cuts were not part of the deal. 
The company is the nation’s 14th largest land driller and the 11th largest pressure pumping company, according to Spears & Associates, but the company gets the bulk of its revenue from Chesapeake Energy, the oil and gas explorer it spun out of in 2014.
Stone Energy could be joining Seventy Seven Energy in the list of companies that do not survive this downturn.  From NGI:
Stone Energy Corp.’s credit facility has been reduced from $500 million to $300 million, resulting in a borrowing base deficiency of $175.3 million, which could lead to a breach of its lending agreement and default, the company said. 
Stone’s bank group told the company of the redetermination on April 13. It has $457 million drawn on the credit facility and another $18.3 million of letters of credit outstanding resulting in the deficiency. Under the terms of its credit agreement, Stone has 30 days to decide if it will repay the loan to eliminate the deficit, add additional collateral to eliminate the shortfall or pay it in six equal monthly installments. 
Stone did not say which option it might choose. The company said in March that given its debt and low commodity prices, a breach of its lending agreements was possible (see Shale Daily, March 15). In that case, lenders could accelerate its debt obligations. Stone said at the time that it was negotiating a waiver or amendment with its bank lenders.

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