Shale driller Chapparal Energy files bankruptcy

8/17/2020

NEW YORK (Bloomberg) --Chaparral Energy Inc.’s filed for bankruptcy protection for the second time in four years, paving the way for bondholders to take control of the Oklahoma driller in the aftermath of sluggish oil prices.

The company filed for Chapter 11 in U.S. Bankruptcy Court in Delaware as it seeks to restructure its balance sheet and raise new money. Almost 80% of first-lien lenders and bondholders gave their support for a proposal to swap $300 million of unsecured notes into equity, raise a $175 million reserves-based exit facility and issue $35 million of convertible notes, Chaparral said in a statement on Aug. 17.

The company listed estimated liabilities and assets of between $500 million to $1 billion.

The Covid-19 pandemic has led to a surge in energy industry bankruptcies, as lockdowns strangle demand and prompt lenders to cut credit lines. So far in 2020, the tally has included California Resources Corp., the state’s largest crude producer, and shale gas driller Chesapeake Energy Corp.

“While we have taken carefully measured and decisive action to address the challenges of 2020, the overall impact to the energy industry, including Chaparral, has been severe,” Chief Executive Officer Chuck Duginski said in the statement. “We intend to maintain normal operations and meet all of our trade commitments timely and under their existing terms.”

The Oklahoma City-based oil and gas producer operates in the Anadarko Basin. It previously filed for bankruptcy protection in 2016, following a plunge in crude prices that started in 2014.

Lenders cut Chaparral’s borrowing base to $175 million from $325 million in April. At the time, the company had borrowed $250 million on its credit facility, leaving it with a so-called borrowing base deficiency that the company subsequently agreed to pay down in installments. Also in April, Scott Pittman resigned as chief financial officer.

The company said it expects that its $32 million of cash reserves will allow it to maintain normal operations in the Chapter 11 restructuring period.

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