FINANACE_MONTHLY

FINANCE MONTHLY: Valuing Gas + Oil Assets

Whether in court or out of court, in most restructuring situations involving stakeholders with various claims to a Company’s assets, the valuation of these assets is a critical component. In restructurings involving oil and gas reserves, the valuation analyses are often more complex because of the technical data and skillset required to value these reserves.

Using their recent work on the Energy XXI case as a backdrop; LM+Co’s Managing Director, Aaron Kibbey and Associate, Brian Bostwick, along with HJ Gruy and Associates’ Robert Rasor, outline the complexities and key considerations when valuing gas and oil assets in the February 2017 issue of Finance Monthly.

DOWNLOAD PDF Finance Monthly valuing oil gas assets the complexities and key considerations

DEBTWIRE PODCAST: EPL Oil & Gas Noteholder Advisors Address Energy XXI Litigation Disputes

In the wake of Energy XXI’s December 30, 2016 plan effective date, WilmerHale bankruptcy and financial restructuring co-chair Phil Anker, Loughlin Management Partners managing directors Aaron Kibbey and John Sordillo, and H.J. Gruy and Associates executive vice president Robert Rasor joined Debtwire legal analyst Richard Goldman for an in-depth discussion on the litigation tactics these advisors employed to protect the interests of, and increase recoveries for, an ad hoc committee of EPL Oil & Gas noteholders. During their conversation, the expert panel addressed an inter-debtor cash collateral dispute that arose in the early days of the Chapter 11 case, the committee’s efforts to recharacterize, subordinate and disallow almost USD $1b in intercompany transfers, and proposed best practices when attempting to value oil and gas assets in support of plan confirmation.


LISTEN TO THE PODCASTKey Topic Time Stamps
06:26 Case background, capital structure and Chapter 11 descent discussion.
16:55 Cash collateral discussion.
29:15 Intercompany transfer discussion.
1:03:11 Asset valuation discussion.


 

COURT: Erickson judge grants interim approval of DIP financing, operational motions at first day hearing

As first reported in Debtwire10 November 2016 | 17:12 EST

The bankruptcy judge overseeing the Chapter 11 case of Erickson Inc today approved the company’s first day motions, including use of its two debtor-in-possession (DIP) financing facilities.

Judge Harlin “Cooter” Hale of the US Bankruptcy Court for the Northern District of Texas approved the helicopter services provider’s motions to pay employee wages, cash management and retention of Kurtzman Carson Consultants (KCC) as claims agent. The judge did not set a “second day” hearing for final approval of today’s motions.

Erickson filed for Chapter 11 on 8 November with USD 66.67m in term loan DIP financing from its second lien lenders and another DIP from its first lien lenders that will partially roll up USD 130m in first lien debt. The DIP requires the company to confirm a reorganization plan by 7 April 2017. Debtor counsel Kenric Kattner of Haynes & Boone said today that the company is taking a three-pronged approach to its reorganization: reduce costs, restructure its balance sheet and determine what, if any, aircraft leases it will reject.

The company met resistance to its DIP financing from the office of the US Trustee, who took issue with a provision that would have the company make a USD 14.2m payment to perform under a contract with Military Sealift Command, the transportation provider for the US Department of Defense. The trustee said that the debtor had not taken the proper steps to make the payment, and that the company was essentially assuming a lease on the first day without actually filing a motion to do so.

The parties broke this afternoon to negotiate and returned with an agreement that will approve the DIP on an interim basis, though the details of the deal were not revealed.

The term loan DIP comes from holders of the company’s USD 355m 8.25% second lien notes due 2020, while Wells Fargo is agent on the first lien debt and the revolver DIP. The financing requires the company to win final DIP approval by 12 December, confirm a Chapter 11 plan by 7 April and put a plan into effect by 17 April.

The 8.25% notes last traded today at 37.75, down from 44.5 a month ago, according to MarketAxess.

You Have a Troubled Reserve-Based E+P Loan. What Happens Next? An Action Plan for Lenders

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With the collapse in oil and gas prices, many exploration and production loans are now stressed or even distressed, as borrowing bases decline and development slows. Lenders are facing a difficult period with many borrowing bases now over-advanced or will soon be later this year. Given the real possibility of severe asset deterioration in a protracted workout or bankruptcy, lenders and borrowers need to take immediate action to preserve value for all stakeholders.

Based on LM+Co’s experience with E+P lending, workout and restructuring, we have put together a summary action plan to help portfolio managers, workout lenders, and credit officers begin the process of identifying the major issues and preparing a range of strategic options, up to and including bankruptcy. We hope that this plan will provide value not only to LM+Co’s lender clients, but also borrowers that are now operating in a challenging credit environment.

With its full suite of advisory, consulting and corporate finance services, LM+Co can assist lenders and their borrowers to mitigate the potential risks in today’s volatile energy market. Please reach out to us if we can be of assistance.

 

LM+Co Capital’s Q2 2015 Newsletter

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LM+Co Capital is pleased to present our middle market update for Q2 2015. This newsletter highlights the key trends impacting US M+A and Capital Markets activity for the remainder of 2015. Following record deal activity in 2014, the second half of 2015 is expected to remain strong and will benefit from lower rates and substantial dry powder in the market. The market will continue to favor a “flight to quality” for companies with sustainable cash flows and strong management teams. In addition, increased deal activity will result from distressed opportunities in Oil + Gas, Healthcare and Defense.

*LM+Co Capital is an independently operated affiliate of LM+Co. A licensed broker dealer, LM+Co Capital is registered with FINRA, SIPC.

Oilfield Service Companies to Ride Out the Low Price of Oil

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LM+Co is pleased to announce that it has enhanced its capabilities to address the restructuring needs of the Energy Sector focusing on debtor and lender advisory services. Our deep knowledge of industrial company operations both in manufacturing and service businesses combined with our core capabilities in turnaround management and restructuring, have been immensely useful to companies and their stakeholders that support oil and gas exploration, production and refining.

We have added a number of folks to our team, most notably Murray Brasseux who has been a leading energy financier for the past 30 years. He has a deep understanding of all aspects of the industry. Murray previously ran the Oil and Gas Division of BBVA Compass Bank in Houston. Having financed hundreds of energy companies over the past three decades, Murray is well known in the industry.

Falling prices for oil and gas has led to a sharp decline in drilling activity. Oilfield service companies are feeling the stress of falling demand for their services. We estimate that oil and gas reserve borrowing bases have contracted by 15-20% during the first half of this year, adding additional liquidity strain to exploration and production companies experiencing both falling revenues and profits. Another contraction in borrowing bases in the second half of this year is a real possibility. Companies and their stakeholders should be planning for just such a contingency.

 A Battle Plan for Oilfield Service Companies to Ride Out the Low Price of Oil speaks to the issues currently facing oilfield service companies and an approach to dealing with the operational and financial pressures. With its full suite of advisory, consulting and corporate finance services, LM+Co can assist companies and their stakeholders to weather the current industry downturn.

LM+Co proud to sponsor OGIS New York 2015

Loughlin Management Partners is proud to sponsor and participate in the Independent Petroleum Association of America’s 21st Annual Oil & Gas Investment Symposium New York.  There is no better way to stay connected with the major companies and investors in the Oil & Gas industry than this outstanding event.  We look forward to not only reconnecting with our contacts in Oil & Gas, but also making new connections as we continue to grow our practice in this dynamic industry.

Learn more about OGIS New York 2015

From Black Belt to CEO: 10 lessons you learn along the way and why you should never forget them

In 1998 you were a black belt and now, 17 years, later you are the CEO of your firm. Have you called Jack Welch, Mikel Harry or your MBB to thank them for believing in you? If not, it’s time to do so. But what comes next? You go big on the 10 things you did to get to where you are today.

1. Remember that effective change is a product of the technical solution and its’ acceptance.

So how do you address the acceptance issues and leverage all of the intelligence in your organization and your supply chain?

  • Get to know all of the people across your organization – know their names and faces cold. Set up a breakfast with the three to five people a week that are critical to the success of the organization and recognize their contribution
  • Lunch is reserved for your consultants, suppliers, industry gurus, bankers and board members
  • Dinner and drinks (and the occasional sporting event) are reserved for clients
  • Wake up thanking your people, learn new things at lunch and wow your clients at dinner with all that your organization can do.

2. Single Source of Truth – In God we trust all others bring data.

There should be only one source of data on the business – the CFO must have the financial data and the COO the operational data. If the data is wrong, tell your people to work through the CFO and COO to make it right. No one brings their own data to the meeting – there is just one set of books in your company and the measurement system is tested.

3. Strategy – big word – what is it that your company does that others can’t?

Will anyone pay you for that? Is it enough to be viable?

4. People – if your business isn’t viable, and you don’t have a way to pay your people, it is a moral imperative to tell them before they leave a perfectly good company to join you in your quest.

5. Manage the Enterprise Value of the company.

The equation is easy: EBITDA x Multiple = Enterprise Value. But what are you doing to make them both go up? EBITDA is critical but Multiple is your challenge.

6. Limited resources – what are you going to mass your energy around?

7. Your problem/opportunity statement – be clear and make sure your people are clear on what they are doing.

8. Ask ‘why’ 5 times and after you’ve mastered asking ‘why’ five times, start asking ‘why’ 15 times.

9. Employ people that are more talented, hungrier and more aggressive than you.

10. Go big and go bold but place your ego on hold.

These 10 lessons are the building blocks for any successful CEO. They got you to where you are today and will always help you face what comes tomorrow. Most of all, never forget the biggest lesson of all:

11. Regardless of what happens during your tenure as the CEO, the worst thing that will happen is you crash and burn and tomorrow you take a job as a black belt – the best two years of your professional life.

Move to LPTA Changes the Game for Middle Market Government Contractors

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To accomplish more with less, acquisition officers and policy-makers have implemented new policies, including Lowest Price Technically Acceptable (LPTA). LM+Co Managing Director Marty Young explains why.