Kohlberg Kravis Roberts & Co. LP (NYSE: KKR) portfolio company Samson Resource Corp. has filed for bankruptcy with a plan to reorganize the oil and gas business under new owners. If the proposal receives bankruptcy court approval, Samson's second-lien lenders --including Silver Point Capital LP, Cerberus Capital Management and Anschutz Investment Co.--would wind up owning the company’s equity.
Anschutz is a Denver-based investment firm; New York-based Cerberus is a private equity firm; and Silver Point is a Greenwich, Connecticut-based hedge fund with a focus on distressed companies.
Samson, a Tulsa, Oklahoma-based onshore oil and gas exploration and production company, has been backed by KKR and PE firm Crestview Partners since 2011, when they paid $7.2 billion to take over. The business has operations in Colorado, Louisiana, North Dakota, Oklahoma, Texas and Wyoming and 600 employees (down from about 1,200 at the time of the buyout).
Drastic declines in the price of crude oil have hurt many energy businesses. (For more distressed energy coverage, see Crude Volatility Shakes Up Victory Energy, Oil Firm Escalera Reaches Forbearance, Delays Possible Bankruptcy, and Mergers & Acquisitions' Distressed Company Watch List.)
"Oil and gas companies across the United States and around the world are feeling the pressure from the downward spiral in commodity prices, and the fate of many of these companies is yet to be determined," says Samson CFO Philip Cook in a declaration filed in bankruptcy court. "With increasing leverage because of a constant need for capital, together with the recent rising cost of capital in the industry, operating in the current environment has been – and likely will remain – challenging."
Low gas prices, a steep drop in the price of oil and market uncertainty contributed to Samson's problems. Before the Chapter 11 petition, the business suspended drilling activity to cut costs and sold properties in Oklahoma for $48 million in March, according to court documents. Samson also considered not making a $110 million interest payment in February and filing for bankruptcy, but ultimately decided to proceed with the payment.
After that, in March, the business snapped further into restructuring mode, amending a credit facility in order to have time to negotiate.
Two very different plans emerged. One, from Samson's noteholders, planned to refinance indebtedness and inject new capital essentially to buy time in the hope that commodity prices would rebound, court documents show. The second, (and the one that Samson proposed to the bankruptcy court) deleverages the business by more than $3 billion and would infuse $450 million in new capital that could be used to restart drilling operations.
Samson garnered approval of a restructuring support agreement from 68 percent of second-lien lenders on Aug. 14– but that deal means the company has to try to move through bankruptcy quickly and confirm a plan by Dec. 1.
Samson filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Sept. 16. Judge Christopher Sontchi is assigned to the case.
Kirkland & Ellis LLP and Blackstone Advisory Partners are advising Samson.