Case Study

Energy Lending Group

The Fire

Agent and lenders loan approximately $145 million to E&P producer with a gas transmission subsidiary.
Company’s business model was to purchase divested producing South Texas oil & gas assets from major and independent oil companies using bank financing, integrate and exploit their potential, make additional acquisitions for size, and divest them to another purchaser.
2017 gas price declines, coupled with a failed acquisition and declining liquidity, leads to multiple loan defaults.

Performed a thorough review of the company, its business and current financial position that included an assessment of operations, management team, oil & gas reserve studies, hedging strategies, evaluation of its business plans and underlying financial forecasts.
Conducted an evaluation of the company’s cash management processes, near-term and long-term liquidity needs.
Reviewed financial, operational and contractual matters pertaining to its gas transmission subsidiary and its relationship to the borrower.

Determined company was relying on bank financing to close a proposed acquisition that would double its cash flow and reserves, while substantially improving the overall debt ratios. With the failure of this “Hail Mary”, inevitably, the company faced a severe fiscal crisis.
Provided the agent and bank group with a comprehensive 6-point set of recommendations to improve cash and field operations that included options to replace management to reduce overhead and excessive overhead costs, and a plan to restructure debt without a Chapter 11 filing and related option, including a liquidation and wind-down scenario.