Extraction Oil and Gas files for Chapter 11 bankruptcy

DENVER — The fourth-largest oil and gas producer in Weld County has filed for Chapter 11 bankruptcy as the broader energy industry continues to struggle with debt loads and weak fuel demand due to the pandemic.

In a Monday morning statement, Denver-based Extraction Oil & Gas Inc. (Nasdaq: XOG) said it had secured $125 million in new financing to keep the company operating during the bankruptcy period. It also said it reached a deal to restructure a portion of its long-term debt to give its largest bondholders a majority stake in the company, but noted that not all of its bondholders have agreed to that plan.

Extraction carried a significant amount of debt coming into 2020, ending last year with a debt-to-equity ratio of 4.4, according to a BizWest review of oil firms operating in Weld County. It ended the last quarter carrying $2.28 billion in liabilities, including $1.08 billion in long-term debt.

Then the coronavirus pandemic swept across the U.S., Europe and other large economies, and the resulting stay-at-home orders kneecapped demand for fuel as travel ground to a halt. Prices for West Texas Intermediate fell to around $20 per barrel in March and temporarily went negative, which placed multiple producers under severe financial duress.

Whiting Petroleum Corp. (NYSE: WLL) already filed for bankruptcy in April to reorganize $2.2 billion in long-term debt.

Extraction was showing signs of stress over the past several weeks. In mid-May, the company elected to hold off on paying $14.8 million in interest on a long-term debt note due in 2024 and took a 30-day grace period, which expired Sunday.

Earlier this week, Extraction executives agreed to receive $6.7 million in payments to sign retention agreements and cancel their participation in a company incentive plan, according to a disclosure to the U.S. Securities and Exchange Commission.

Retention agreements are often used to keep key executives from fleeing a company in the midst of a bankruptcy period.

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