Bonanza Creek Energy plans Chapter 11 bankruptcy

DENVER — Bonanza Creek Energy Inc. (NYSE: BCEI) intends to file a prepackaged Chapter 11 bankruptcy case in U.S. Bankruptcy Court for the District of Delaware on or prior to Jan. 5, 2017, the company announced on its website.

Bonanza Creek is an oil and gas company focused on the Wattenberg Field, located largely in Weld County, including the Niobrara and Codell formations, and in southern Arkansas. The company has struggled under the weight of low energy prices.

Richard Carty, Bonanza Creek’s chief executive, said in a prepared statement that the Chapter 11 restructuring will improve the company’s competitive position.

“During 2016 we have been working diligently to reduce our cost structure and improve operating efficiencies under our commitment to rapid continuous improvement initiatives,” Carty said. “The Restructuring Support Agreement announced today further increases our competitive position with significant improvements in firm transportation commitments, a comprehensive elimination of more than $850 million in unsecured balance sheet principal, accrued interest and prepayment premiums, and a concurrent injection of $200 million in equity to fund our go-forward development plan. Effected by way of a proposed prepackaged chapter 11 filing, this represents the culmination of countless hours of hard work from various parties to resolve legacy encumbrances that restricted our access to liquidity and constrained asset development.”

Key elements of the plan include:

  • Elimination of more than $850 million of principal, accrued interest and prepayment premiums due from senior notes. “In exchange, approximately 95.5 percent of reorganized Bonanza Creek’s equity as of the effective date of the Plan (the “Effective Date”) (subject to dilution by a rights offering for new equity, a management incentive plan, and warrants for existing equity holders) and the opportunity to participate in an equity rights offering that will raise $200 million of new capital will be made available to holders of general unsecured claims against the Company as provided for in the Plan,” according to the statement. “This new capital commitment will be backstopped pursuant to an agreement to be entered into by certain Supporting Noteholders, subject to approval by the Bankruptcy Court.  Bonanza Creek anticipates emerging from chapter 11 with no funded debt and has sufficient liquidity to operate during the case.”
  • Restructuring of Bonanza Creek’s crude oil purchase and sale agreement with NGL Crude Logistics LLC on more favorable terms to the company.
  • Payment of all customer, employee, royalty and working interest obligations in full.
  • Providing the company’s existing shareholders, “in exchange for the releases by such shareholders of the Released Parties (as defined in the Plan), with consideration in the form of 4.5 percent of reorganized Bonanza Creek’s equity on the Effective Date (subject to dilution by a rights offering for new equity, a management incentive plan, and warrants for existing equity holders) and three-year warrants to acquire up to 7.5 percent of equity in reorganized Bonanza Creek.”

Bonanza Creek also is negotiating with Keybank N.A. regarding its revolving credit facility under chapter 11 bankruptcy.

The plan is subject to approval by U.S. Bankruptcy Court. Bonanza Creek hopes to emerge from Chapter 11 before the end of the first quarter of 2017.