(Bloomberg) — Gulfport Energy Corp. filed for bankruptcy, joining a slew of U.S. oil and gas companies that are collapsing after the pandemic deepened their struggle with low prices and too much debt.
The Oklahoma City-based natural gas company filed a Chapter 11 petition on Nov. 13 in U.S. Bankruptcy Court in Houston, declaring an estimated $2.5 billion in liabilities as of Sept. 30. In a statement Saturday, the company detailed a restructuring plan that it expects would cut debt by about $1.25 billion.
“We expect to exit the Chapter 11 process with leverage below two times and rapidly delever thereafter,” Chief Executive Officer David M. Wood said. “These improvements will significantly improve our ability to generate cash flow and value for our stakeholders going forward.”
Gulfport, which produces gas from fields in Ohio and Oklahoma, was grappling to stay afloat even before Covid-19, after a series of acquisitions over the past decade left it too indebted to weather the energy rout. Following pressure from activist investor Firefly Value Partners to change its board, the company on Aug. 7 warned it might not be able to stay in business if it failed to refinance its debt.
Many investors have shunned producers operating outside of the Permian Basin of West Texas and New Mexico, the most prolific U.S. oil patch, amid growing doubts about their ability to generate returns. BlackRock Inc., with 12.9%, is the biggest controller of voting shares in Gulfport.
The Scoop shale play in Oklahoma, one of the areas where Gulfport bought assets, moved from being an exploration hot spot a few years ago to an area of little relevance after its geology proved too challenging. There are just a few drilling rigs remaining in the state, down from over 200 in 2014, according to Baker Hughes data.
More roadblocks appeared when the coronavirus prompted widespread lockdowns that decimated global demand for fuels. More than 230 oil and gas explorers have filed for bankruptcy since 2015, with total debt of over $150 billion, according to a July report from law firm Haynes and Boone.
Gulfport’s ability to reject gas transportation service agreements with Rockies Express Pipeline LLC under bankruptcy could be limited after the Federal Energy Regulatory Commission recently declared them in public interest.
The largest unsecured creditor is UBM Financial Corp. which holds about $1.8 billion of notes due 2023 to 2026, according to the filing.
As part of the restructuring agreement, the company will issue $550 million of new senior unsecured notes to existing unsecured creditors of some of its subsidiaries.
Gulfport also secured $262.5 million in debtor-in-possession financing from its existing lenders under its revolving credit facility, including $105 million in new money that will be available upon court approval.
Existing lenders committed to provide $580 million in exit financing upon the company’s emergence from Chapter 11, Gulfport said.
Shares, which traded as high as $3.38 in December 2019, were worth about 24 cents as of the company’s Chapter 11 filing.
The case is in re Gulfport Energy Corp., 20-35562, U.S. Bankruptcy Court, Southern District of Texas.
(Adds comment from CEO in third paragraph, details of restructuring plan from 10th.)
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