Houston-based Goodrich Petroleum Corp. on Friday joined the ranks of U.S. energy firms that are unable to keep up with debt payments, filing to voluntarily restructure under Chapter 11. Meanwhile, Linn Energy LLC made some of its required interest payments, but it faces a steep financial hurdle over the coming month.
The restructuring support agreement (RSA), filed in U.S. Bankruptcy Court for the Southern District of Texas, came after Goodrich reached an agreement with creditors in late March (see Shale Daily, April 1). The RSA is expected to eliminate about $400 million in debt from the balance sheet, deleverage the capital structure and position the onshore operator for "long-term performance in an anticipated improving commodity price environment." Goodrich's filing came one day after Gulf of Mexico producer Energy XXI Ltd. began its official restructuring (see Daily GPI, April 14).
The RSA eliminates all of Goodrich's pre-petition funded debt, other than its first lien reserve based loan facility, which currently has about $40 million outstanding. The agreement also allows the executive management team "to remain with the company, which will allow for the company's operations to continue as normal throughout the court-supervised financial restructuring process, including the payment of royalty and operating expenses."
Goodrich management said it now is focused on its "next step," to "respond proactively in a depressed commodity environment. Prior to the Chapter 11 filing, the company attempted to restructure its balance sheet through voluntary exchange offers," but it said the latest effort was unsuccessful because of "the inability to get the necessary approvals from its common stockholders, preferred stockholders and unsecured noteholders."
Goodrich expects to maintain enough liquidity to support the business during the financial restructuring process. It has filed motions with the bankruptcy court to support the restructuring and said it intends to continue to pay wages and provide benefits to its staff, as well as pay suppliers and vendors. Royalty payments to landowners also are to continue.
Houston-based Linn said Friday it made three required interest payments totaling $60 million on Thursday with subsidiary Berry Petroleum Corp., within an allowed 30-day grace period. A $30 million payment was made on 7.75% senior notes due February 2021, $12 million was paid on 6.50% senior notes due September 2021 and $18 million was paid on senior notes due September 2022.
Linn management repeated what it said in March, that it is in the "process of exploring strategic alternatives" to improve the balance sheet and maximize its value (see Shale Daily, March 15). Financial and legal advisers are working with lenders to ensure "long-term liquidity needs are met, including the possibility of restructuring under a Chapter 11 plan of reorganization."
Linn remains under the gun to come up with another $58 million that was due Friday (April 15).Another 30-day grace period was exercised for a $30 million interest payment on 8.625% senior notes due April 2020, $18.2 million of 6.25% senior notes due May 2019 and $8.8 million of 6.75% senior notes due November 2020.
If Linn fails to make the interest payments within the grace period and is otherwise unable to obtain a waiver or suitable relief from its lenders, a default will occur, it said.
In related news, State College, PA-based producer Eclipse Resources Corp. said it had regained compliance with New York Stock Exchange requirements that its share price remain above $1.00 over a 30-day period. Eclipse had been notified in February that it faced delisting (see Shale Daily, Feb. 29). Early Friday Eclipse was trading at about $1.68/share. In February the Appalachian operator completed its spring borrowing base redetermination, which resulted in no change to its $125 million borrowing base.