Former shale star Whiting Petroleum files for bankruptcy

Whiting Petroleum files for Chapter 11

This is a pretty big deal. In Q4 Whiting Petroleum produced 123,000 BOE/d. Much of that is natural gas with around 80K bpd of oil. It’s not clear how much of that will be shut in during Chapter 11.

This company was a favourite of shale shorts, including myself. It was at $8 early in the year but has been in a death spiral for years.

The company drew down on its $650m credit facility yesterday — I’d hate to be the bank on the other side of  that.

Here’s the statement:

Commences Chapter 11 Reorganizational Process to Right-Size Capital Structure

Whiting Petroleum Corporation (NYSE: WLL)
and certain subsidiaries (collectively, “Whiting” or the “Company”)
today announced that they had commenced voluntary Chapter 11 cases under
the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Company has more than $585 million
of cash on its balance sheet and will continue to operate its business
in the normal course without material disruption to its vendors,
partners or employees. Whiting currently expects to have sufficient
liquidity to meet its financial obligations during the restructuring
without the need for additional financing.

The Company has also reached an agreement in principle with certain
holders (the “Supporting Noteholders”) of its 1.25% convertible senior
notes due 2020, 5.750% senior notes due 2021, 6.250% senior notes due
2023, and 6.625% senior notes due 2026 (collectively, the “Notes”)
regarding a term sheet (the “Term Sheet”) that contemplates a
comprehensive restructuring. The proposed financial restructuring, the
terms of which will be set forth in a forthcoming restructuring support
agreement between the Company and the Supporting Noteholders, would
significantly reduce the Company’s debt and establish a more sustainable
capital structure pursuant to a consensual chapter 11 plan of
reorganization (the “Plan”) that would be supported by the Supporting
Noteholders on the terms of such restructuring support agreement.

The Plan will provide for, among other things: (1) significant de-leveraging of the Company’s capital structure by over $2.2 billion
through the exchange of all of the Notes for 97% of the new equity of
the reorganized Company to be issued pursuant to the Plan; (2) payment
in full in cash and/or refinancing of the Company’s revolving credit
facility; (3) the payment in full in cash of all other secured
creditors, tax and other priority claimants, and employees; and (4) the
Company’s existing equity holders receiving 3% of the new equity of the
reorganized Company and warrants (as described in the Term Sheet).
Consummation of the Plan will be subject to confirmation by the Bankruptcy Court in addition to other conditions to be set forth in the Plan and related transaction documents.

Bradley J. Holly, the Company’s Chairman, President and
CEO, commented, “In 2019, we took proactive steps to reduce our cost
structure and improve our cash flow profile. We continue to build on
these actions in 2020. The Company has also explored a wide variety of
alternatives to address our balance sheet and looming note maturities in
a highly capital constrained market environment.

Given the severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi / Russia
oil price war and the COVID-19 pandemic, the Company’s Board of
Directors came to the conclusion that the principal terms of the
financial restructuring negotiated with our creditors provides the best
path forward for the Company. We are pleased to have secured a highly
constructive restructuring framework with a critical mass of our
noteholders. Through the terms of the proposed restructuring, we believe
a right-sized balance sheet will enable us to capitalize on our
enhanced cost structure, high-quality asset base and successfully
compete in the current environment.”

Mr. Holly continued, “I want to express my gratitude to
the employees for their continued dedication and hard work, and to our
service providers and business partners for their ongoing support during
this time. Following the restructuring process, we look forward to
having substantially less debt and a significantly improved outlook for
our Company and its stakeholders.”


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