SandRidge Energy Files for Bankruptcy Protection
May 20, 2016 12:45 AM EDT
SandRidge Energy has filed for Chapter 11 on Monday, expecting to convert $3.7 billion of long-term debt into equity while allowing the company to keep operating. It seeks to restructure its huge load of debt and has revealed a restructuring support deal.
The company which is based in Oklahoma filed the bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. It stated that the creditors supported them holding more than two-thirds of its $4.1 billion in total debt. It also requested the court for permission to keep up with its every day operations so they could continue paying salaries, royalties and interest without any hindrance and that the suppliers and vendors would be compensated under their normal terms, The New York Times reported.
"We are pleased that our creditors recognize the long-term value SandRidge and its employees can create with an improved balance sheet," SandRidge President and CEO James Bennett said in a written statement. "The new capital structure will allow the Company to concentrate on oil and gas exploration and development in our active Oklahoma and Colorado project areas."
According to Reuters, SandRidge has a total asset estimated at $7 billion and a total debt of $4 billion with Breitburn listed assets of $4.7 billion and $3.4 billion liabilities. The company has arrived at a pre-packaged bankruptcy agreement with creditors. It has accepted a reserve-based lending facility and an exchange of $3.7 billion of other funded debt for equity.
SandRidge was founded in 2006 by Tom Ward and generates shale formations in Kansas and Oklahoma. The company's board supplanted Ward who also helped natural gas company Chesapeake Energy Corp to start, as chief executive officer in June 2013 after an argument with activists shareholders.
The oil and gas producer has liquidity issues in the past months and a used a 30-day grace period in February for outstanding interest payments even though these payments were created before the end of the grace period and the firm prevented a default at that time, Seeking Alpha reports.
Small producers of oil and gas have massively completely used up funding substitutes and debt and giving of assets over the last two years to continue their operations. Not many scrabbling energy companies have been able to find buyers even though there was a distinctive exception on Monday as Range Resources Corp announced that it will acquire fellow natural gas producer Memorial Resource Development Corp. amounting to nearly $3.3 billion in stock.