Oil & Gas Financing and Investment Series

Transcription

1 Oil & Gas Financing and Investment Series Updates on Recent Oil and Gas Refinancings, Restructurings, and Bankruptcies January 19, 2016

2 Jeff Nichols Chair of Energy Finance Practice Houston

3 PANIC AT THE DISCO 3

4 HAYNES AND BOONE, LLP BANKRUPTCY MONITOR 4

5 WHY? INCREASING DEBT AND DECREASING NET CASH FLOWS AlixPartners Report Revenue estimates for a group of 134 publicly traded, North American based E&P companies show a $102-billion funding gap in 2016 (figure 6). That means that without a meaningful increase in prices, producers will have to either improve their productivity via cost reductions and/or improved capital efficiencies or sharply reduce their capital expenditures by the equivalent of an additional $102 billion in order to be able to operate within their internally generated cash flows in See: Gas-Industry-Outlook.aspx#sthash.uaXLhkOk.dpuf 5

6 LEVERED VS UNLEVERED (1) 6

7 LEVERED VS UNLEVERED (2) 7

8 PA-North - Tier 1 Utica Dry Gas - Tier 1 De Witt - Tier 1 PA-West - Tier 1 WV - Tier 1 Sugarkane - Tier 1 Eagleville - Tier 1 Hawkville - Tier 1 Central Basin Platform - Tier 1 Sugarkane - Tier 2 Briscoe Ranch - Tier 1 De Witt - Tier 2 De Witt - Tier 3 Antelope - Tier 1 Threshold - Tier 1 Other - Tier 1 Delaware Basin - Tier 1 Mississippi Lime - Tier 1 Midland Basin - Tier 1 Tiffany - Tier 1 Parshall - Tier 1 Wattenberg - Tier 1 Ardmore - Tier 1 Sugarkane - Tier 3 Sanish - Tier 1 Eagleville - Tier 2 Nesson - Tier 1 Threshold - Tier 2 Gates Ranch - Tier 1 Cana Woodford - Tier 1 Turner - Tier 1 Parkman - Tier 1 PA-South - Tier 1 Ft. Worth - Tier 1 Eagleville - Tier 3 Briscoe Ranch - Tier 2 Giddings - Tier 1 Bailey - Tier 1 Texas Gulf Coast Gaps - Tier 1 Sussex - Tier 1 Northwest Shelf - Tier 1 Threshold - Tier 3 Parshall - Tier 2 Shannon - Tier 1 Wattenberg Extension - Tier 1 Antelope - Tier 3 Wattenberg - Tier 2 Ambrose - Tier 1 West Nesson - Tier 1 Frontier - Tier 1 Poplar Dome - Tier 1 Wattenberg - Tier 3 Eastern Shelf - Tier 1 Rose Area - Tier 1 Delaware Basin - Tier 2 Cana Woodford - Tier 2 Mississippi Lime - Tier 2 Midland Basin - Tier 2 Ambrose - Tier 2 Niobrara - Tier 1 Sanish - Tier 3 Antelope - Tier 2 Utica Lean Condensate - Tier 1 Granite Wash - Tier 1 West Nesson - Tier 3 Mississippi Lime - Tier 3 Bailey - Tier 2 Elm Coulee - Tier 1 Sanish - Tier 2 West Nesson - Tier 2 Hawkville - Tier 2 Turner - Tier 2 WV - Tier 2 Nesson - Tier 2 Utica Rich Condensate - Tier 1 TX - Other - Tier 1 Gates Ranch - Tier 2 Aguila Vado - Tier 1 Poplar Dome - Tier 2 Fringe - Tier 1 Teapot - Tier 1 Other - Tier 1 Wattenberg Extension - Tier 3 Wattenberg Extension - Tier 2 Silo - Tier 1 Parshall - Tier 3 Cleveland/Tonkawa - Tier 1 Ft. Worth - Tier 3 Red River - Tier 1 Arkoma - Fayetteville - Tier 1 Rose Area - Tier 2 Delaware Basin - Tier 3 PA-West - Tier 2 Briscoe Ranch - Tier 3 Utica Lean Condensate - Tier 2 Eagle Ford Dry - Tier 1 Giddings - Tier 2 Niobrara - Tier 2 Parkman - Tier 2 Northwest Shelf - Tier 2 Bailey - Tier 3 Texas Gulf Coast Gaps - Tier 2 Sussex - Tier 2 Other - Tier 3 Ambrose - Tier 3 Gates Ranch - Tier 3 Shannon - Tier 2 Billings Nose - Tier 1 Giddings - Tier 3 Northwest Shelf - Tier 3 Cleveland/Tonkawa - Tier 2 Midland Basin - Tier 3 Nesson - Tier 3 Arkoma - Woodford - Tier 2 Hawkville - Tier 3 Other - Tier 2 Arkoma - Woodford - Tier 1 Elm Coulee - Tier 2 Central Basin Platform - Tier 2 Elm Coulee - Tier 3 Eagle Ford Dry - Tier 2 Turner - Tier 3 Peach Creek - Tier 1 Ft. Worth - Tier 2 Poplar Dome - Tier 3 PA-South - Tier 2 Granite Wash - Tier 2 St. Demetrius - Tier 1 Ardmore - Tier 2 Cana Woodford - Tier 3 Cleveland/Tonkawa - Tier 3 Rose Area - Tier 3 Val Verde Basin - Tier 1 Mowry Muddy - Tier 1 Utica Lean Condensate - Tier 3 Sedgwick - Tier 1 Sussex - Tier 3 Red River - Tier 2 Hereford - Tier 1 Ardmore - Tier 3 Bear Grass - Tier 1 Texas Gulf Coast Gaps - Tier 3 Niobrara - Tier 3 Billings Nose - Tier 2 WV - Tier 3 Central Basin Platform - Tier 3 ARKLA - Haynesville - Tier 1 PA-West - Tier 3 Granite Wash - Tier 3 Shannon - Tier 3 Parkman - Tier 3 Utica Rich Condensate - Tier 2 Fringe - Tier 2 Heath - Tier 1 Val Verde Basin - Tier 2 Red River - Tier 3 PA-North - Tier 2 PA-North - Tier 3 Utica Dry Gas - Tier 2 Utica Dry Gas - Tier 3 Utica Rich Condensate - Tier 3 Frontier - Tier 3 Eastern Shelf - Tier 3 Arkoma - Fayetteville - Tier 2 TX - Other - Tier 3 Eastern Shelf - Tier 2 Eagle Ford Dry - Tier 3 Arkoma - Woodford - Tier 3 PA-South - Tier 3 ARKLA - Haynesville - Tier 3 Billings Nose - Tier 3 Fringe - Tier 1 Arkoma - Fayetteville - Tier 3 Frontier - Tier 2 Fringe - Tier 3 Val Verde Basin - Tier 3 ARKLA - Haynesville - Tier 2 NM - Other - Tier 1 TX - Other - Tier 2 Marathon-Ouachita - Tier 1 Fringe - Tier 1 WTI Breakeven ($/Bbl) U.S. Production Economics: Tracking 250+ Breakevens In Major Basins $100 $90 $80 $60/b WTI $52/b WTI $46/b WTI Little Activity Before Price Collapse $70 $60 $50 $40 $30 $20 $10 $0 Many Areas Come Back In The Money Between $50 and $70 WTI Break-Evens Calculated With $2.35 Gas Price Assuming 20% MARR (minimum acceptable ROR) 3Q2015 Reported Drilling & Completion Costs Sources: Ponderosa Advisors 8

9 BUT FUTURES PRICES ARE RARELY RIGHT Analysts Views are still $45 to $50 Ave for 2016 WSJ Survey of 12 Banks Analysts: (Jan 12): $48 Ave for

10 WHITHER THE BORROWING BASE Why this is so important HB Surveys: Spring, 2015: -25% (projected; public and private) Fall, 2015: -39% (projected; public and private) Spring, 2016: Other BB Analysis MS 10-15% for Fall, 2015 (estimated actual; public and private)* Deloitte: Average 12-20% (estimated actual; public)** Other Important Distinctions Public vs. Private Announced vs. unannounced, delayed etc. *Morgan Stanley Research, December 1, 2015 **Interview with William Snyder, Deloitte Transactions and Analytics, published in Rigzone, November 9,

11 Ian Peck Chair of Bankruptcy Practice Dallas

12 RECENT E&P BANKRUPTCIES Per our Oil Patch Monitor, 42 E&P companies filed bankruptcy in North America in 2015 Over $17 billion in debt at issue in these cases We can t talk about all of them how does one narrow it down? The Rule of Threes Three were given to the Elves Lord of the Rings: The Fellowship of the Ring Three is a magic number Schoolhouse Rock 12

13 RECENT E&P BANKRUPTCIES (THE LATEST AND GREATEST) 1. Swift Energy Company (12/31/2015, Delaware) 2. New Gulf Resources, LLC (12/17/2015, Delaware) 3. Energy & Exploration Partners, Inc. (12/7/2015, N.D. Texas) 13

14 SWIFT ENERGY COMPANY 1. Total debt of approximately $1.3 billion 2. Prepetition RSA with majority of senior noteholders $905.1 million senior notes converted to 96% of common equity Current shareholders retain 4% of common equity Unsecured creditors paid in full Must reach an agreement re: refinancing of $330 million prepetition RBL facility Plan must go effective within 110 days of filing 3. Noteholders providing $75 million junior DIP financing 14

15 NEW GULF RESOURCES, LLC 1. Total debt of approximately $586 million 2. Prepetition corporate maneuvering necessary to file 3. Prepetition RSA with Ad Hoc Committee representing 72% second lien notes and 22% subordinated notes $75 million DIP from Ad Hoc Committee will pay first lien debt in full New first lien notes $ million; convertible into new common units Second lien notes exchanged for 87.5%-95% of new equity interests Subordinated notes exchanged for % of new equity interests 15

16 ENERGY & EXPLORATION PARTNERS, INC. 1. Total debt of approximately $1.2 billion 2. Voluntary Chapter 11 filing in response to involuntary bankruptcy petition 3. Competing DIP Financing Proposals Debtors negotiated $135 million priming DIP with a minority group of senior lenders prior to filing Majority group of senior lenders objected and proposed a non-priming DIP that was ultimately approved by the Court on an interim basis Resolution: proposed $70 million priming DIP provided by members of both groups 16

17 LIGHTNING ROUND Quicksilver Resources (filed March, Delaware.) Duer Wagner Oil & Gas (filed May, N.D. Texas.) Sabine Oil & Gas (filed July, S.D.N.Y.) Samson Resources (filed September, Delaware.) 17

18 QUICKSILVER RESOURCES Total debt of approximately $2.1 billion Free fall case 363 sale Auction January 20 th ; Sale hearing January 27 th Second lien litigation Court recently ruled that second lien parties had valid and perfected liens on disputed Texas properties 18

19 DUER WAGNER OIL & GAS Total debt of approximately $122 million Free fall case Exit by compromise Settlement between the Debtors and their secured lenders Essentially all of the Debtors assets being turned over to secured lenders Transfer was originally scheduled to be completed no later than January 10, but has been extended to February 1 19

20 SABINE OIL & GAS CORP. Total debt of approximately $2.9 billion Free fall case Mainly characterized by litigation 2014 merger with Forest Oil Corp. $650 million second lien Debtors have not yet submitted a plan; exclusivity period extended through February 10 20

21 SAMSON RESOURCES CORP. Total debt of approximately $4.3 billion Pre-negotiated plan stalled Falling commodity prices made RSA unworkable CEO resignation Originally planned to seek plan confirmation by December 1, 2015 Now exclusivity extended until mid-july to permit alternative strategy formation 21

22 Panel Discussion Charlie Beckham Buddy Clark Ian Peck Gilbert Porter Kelli Stephenson Joe Vilardo

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