Whiting Petroleum (WLL) today announced that it has filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of Texas.
CEO Bradley J. Holly blamed 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. As a result of these factors, “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” he said.
According to the press release, 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. It also has sufficient liquidity to meet its financial obligations during the restructuring without the need for additional financing.
The proposed financial restructuring, which will require confirmation by the Bankruptcy Court, will provide for: (1) significant de-leveraging of the company’s capital structure by over $2.2 billion; (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.
“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” CEO Holly stated.
Shares in Whiting Petroleum have almost halved year-to-date, while oil prices recently plunged to an 18-year low. “With demand collapsing but supply rising after OPEC and non-affiliated Russia failed to reach a production cut agreement in early March, global inventories could reach their maximum capacity within weeks,” Eurasia Group analysts said in a research note on March 30.