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.
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.
Key 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.
Managing Director Pat Fodale will serve as moderator for the Middle Market Energy Entrepreneur Roundtable.
Loughlin Management Partners is proud to present “Restructuring in the oil + gas sector” at the Society of Petroleum Evaluation Engineers (SPEE) on March 2, 2016 in Houston, TX. James J. Loughlin Jr, LM+Co’s Principal + Managing Director, will be the guest speaker at the luncheon meeting, hosted by the organization’s Houston chapter, focusing his presentation on the process and likely outcomes of restructuring.
The presentation comes at a crucial time; the recent drop in commodity prices has led to the bankruptcy filings of more than 40 energy producers and service companies, with many more working hard to avoid a similar fate. Jim will discuss how the industry got to this point, the objectives of restructuring, some possible alternatives, including prearranged and free-fall bankruptcy, and how the future state of the industry could look.
LM+Co provides a full suite of advisory and consulting services, assisting investors and lenders mitigate the potential risks in today’s oil + gas market. LM+Co Capital, our independent affiliate broker-dealer, provides corporate finance services exclusively to the middle-market. LM+Co’s Energy team can help companies adjust their strategies, restructure their operations and capital structures to confront the complexity associated with healthcare investments. For further information, please visit www.lmcopartners.com
Learn More About Houston SPEE Chapter Luncheon Meeting
Plummeting energy prices have dramatically increased the number of failing middle-market Oil Field Services (OFS) companies. These zombies in the oil patch can’t stem the virus of negative cash flows despite cutting labor costs, operating expenses and capital budgets. They are still trying to operate but often not paying all their obligations to lenders, vendors, sub-contractors, employees and other creditors. Despite their struggle to survive, many face imminent collapse and liquidation after becoming increasingly over-levered and saddled with equipment they can’t sell.
Lenders are realizing that these zombies lurk in their portfolios, and are witnessing companies, in essence, liquidating to survive. In today’s market, recovery options for lenders are limited as over-supply has led to incredibly low realizable values on OFS equipment. Waiting and hoping for the business to return is no longer an option for lenders. Further delays will only result in the company’s continued deterioration and possible free fall into restructuring or liquidation. Lenders increasingly need to assess and deal with these zombies with the help of an outside professional that can provide their OFS companies with the expertise and guidance to address the immediate lack of liquidity and develop restructuring alternatives that maximizes recovery.
As energy price volatility continues in global markets, LM+Co provides a full range of advisory services to lenders and the OFS companies in their portfolio. Our Energy + Power team can help OFS companies adjust their strategies, restructure operations and develop an approach to confront turbulent market conditions.
Excess supply and the subsequent plummet in oil prices created the predictable drop in drilling activity by Exploration + Production companies. With limited visibility on when the Oil + Gas industry will improve and drilling activity return to some “normalized” level, many Oil Field Service (“OFS”) companies need to continually focus on maintaining costs.
What should an OFS company facing excess assets and low utilization do? Factors complicating each individual decision include the type of equipment, age, maintenance costs, liquidation value, ownership (own, lease or loan collateral), carrying costs (lease rate or loan payment), potential equity in the equipment, lessor or lender type (i.e. institutional or captive financing). The most important factor is determining if the equipment is excess. LM+Co’s Patrick Fodale discusses what process OFS companies should adopt in order to systematically address excess (and often idle) equipment.
As volatility continues in global energy markets, LM+Co provides a full range of advisory services to OFS companies and our Energy + Power team can help companies adjust their strategies, restructure their operations and capital structures to confront turbulent market conditions.
Loughlin Management Partners is proud to sponsor and participate in the EUCI Financial Restructuring + Turnaround for Oil + Gas Companies conference. This event provides a forum for industry executives, investors, legal professionals and restructuring experts to discuss current options and trends within the energy sector regarding corporate restructuring and turnaround cases and opportunities. LM+Co’s Murray Brasseux will be answering questions during a panel discussion that will give attendees the opportunity to pose questions about the current distressed environment. Topics from the role of Capital Markets and complex debt structures, to the pros and cons of out-of-court restructurings and the role of regulatory authorities will be addressed by a panel of seasoned experts whose legal, M+A and operating experience bring a wealth of perspectives to the panel.
LM+Co provides a full range of advisory services to companies and their investors, as volatility continues in global energy markets. LM+Co’s Energy team can help companies adjust their strategies, restructure their operations and capital structures to confront turbulent market conditions. For further information, please see www.lmcopartners.com
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.
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