After choosing not to make a semi-annual $7.5 million senior notes payment on 1 February, Denver oil and gas company Warren Resources is considering a bankruptcy filing.
The company has 30 days from the due date on the payment before it is considered in default, at which time its first lien and second lien credit facilities would allow lenders to declare all obligations immediately due and payable.
A February 9 company filing said that “if Warren cannot come to a workable agreement regarding an out-of-court restructuring, it will have to seek protection from its creditors through a bankruptcy proceeding in order to preserve and maximise value for its stakeholders”.
James Watt, Warren's president and chief executive said, “These are very difficult times for Warren and its industry peers. We are making significant cuts in both [administrative] and overall operating costs, but we must seek further concessions from our various debt holders and vendors to survive what is anticipated to be a lengthy downturn in commodity prices.”
As of 31 December 2015, Warren's first lien creditors held debt of $235 million in principal amount, the statement said. Second lien creditors held debt of $51 million in principal amount, and investors held $167 million principal amount of the company's unsecured notes. Warren closed out 2015 with $26.8 million in cash on hand.
“Our substantial cash position allows us to continue to meet all obligations to pay suppliers, employees and others, and to continue to fund our operations,” Watt said in a February 1 statement.
According to the note, Warren has engaged Jeffries as financial adviser for a potential restructuring of its balance sheet and initiated discussions with first and second lien creditors.
Warren had been poised to avoid its current financial distress with a deal in the works for Houston-based Escalera Resources to acquire pipeline and coalbed methane assets in Carbon County, Wyoming, for $47 million. But in November the buyer filed for Chapter 11 protections.
The company in October announced plans to relocate its headquarters to New York City from Denver by the end of March.