Just days after the latest two shale casualties filed for bankruptcy protection when both Linn Energy and Penn Virginia announced prepackaged Chapter 11, moments ago Sandridge announced it too was entering bankruptcy court when it filed a voluntarily petition under Chapter 11 in U.S. Bankruptcy Court for Southern District of Texas to consummate a pre-arranged reorganization.
This follows just hours after Breitburn Energy Partners announced it had filed Chapter 11 as it hopes to negotiate a restructuring of its balance sheet in court, continuing talks with creditors that began a month ago, CEO Hal Washburn said in a release.
Combined the two filings would push the total YTD defaulted bond tally higher by another $7.4 billion, as a result of $4 billion in Sandridge debt and $3.4 billion for Breitburn. According to a Reuters tally, some 28 publicly traded North American oil and gas producers have sought bankruptcy protection since early 2015
As the WSJ writes, Breitburn’s decision to file for bankruptcy was made when it became “abundantly clear that those negotiations could not be concluded and an appropriate restructuring consummated on an out-of-court basis” in time to avert a cascade of defaults that would have squeezed Breitburn’s liquidity, James Jackson, chief financial officer of a Breitburn subsidiary, wrote in a court filing.
About $3 billion of Breitburn’s debts are bank and bond debt, topped by $1.25 billion in loans from lenders led by Wells Fargo Bank, NA. Breitburn is carrying $650 million of senior secured second-lien bonds and $1.1 billion in unsecured bonds. Breitburn said it has been in talks with bondholders about a balance-sheet restructuring. The company has lined up $75 million in bankruptcy financing, and is in talks with senior lenders about bankruptcy emergence financing.