Law360 (June 1, 2020, 11:05 AM EDT) -- Oklahoma-based oil and gas driller Templar Energy filed for Chapter 11 protection in Delaware Monday with a plan to liquidate its assets after reeling from oil and gas price disruptions prompted by the COVID-19 pandemic.
Templar owes $437 million under a reserve-based lending facility that is secured by liens on all of its assets, but has reached an agreement with all of those lenders to support the restructuring plan, which calls for the continued marketing and sale of the debtor's assets. Prior to the bankruptcy, Templar failed to make payments on a deficiency obligation triggered last April when the value of the borrowing base under the RBL decreased below the borrowing already made under the facility, according to a first-day declaration from CEO Brian Simmons.
Beginning in the fall of 2019, Templar began marketing its assets and contacted more than 150 potential buyers, receiving several indications of interest but no firm offers, the declaration said. The COVID-19 outbreak and the pricing war made the value of Templar's assets murky for interested buyers and derailed its prepetition sale process.
The RBL lenders will be paid from the proceeds of the sale after all trade creditors have been paid in full, and some of the lenders will be providing $25 million in new post-petition financing to fund the process. The declaration said those lenders will be "deeply impaired" by the proposal, but all have agreed to support the plan and allow the debtor to pay the trade claims first.
The company executed an out-of-court restructuring transaction in 2016 that eliminated $1.45 billion in second-lien debt and injected $365 million of equity capital into the company, Simmons said in the declaration. As part of that deal, second-lien debt holders shared in $133 million in cash and received 45% of the equity in the company while also participating in a new rights offering.
The capital raised through the rights offering was used to partially pay down the existing RBL facility and add to Templar's liquidity, the declaration said. The RBL was also amended to create a new $600 million borrowing base, which eroded over the years as the value of Templar's reserves withered in the bearish energy market.
The company enacted cost-cutting measures in recent years and took steps to raise capital, including selling off its 12 saltwater disposal wells and improving efficiency among its contracted labor force. In the last two months, cost-saving initiatives have reduced operational expenses by $750,000 per month, Simmons said.
Concurrent with the petition, Templar filed a proposed case schedule that envisions a confirmation hearing on July 13. A telephone and videoconference first-day hearing in the case is scheduled for 11 a.m. Tuesday before U.S. Bankruptcy Judge Brendan L. Shannon.
According to initial case documents filed in Delaware court, Templar Energy operates about 2,100 wells on 273,000 acres of land in the Anadarko Basin that covers parts of Oklahoma and Texas, producing about 18,000 barrels of oil equivalent per day in oil, natural gas and natural gas liquids.
Templar did not respond to a request for comment Monday.
Templar is represented by Pauline K. Morgan, Jamie Luton Chapman and Tara C. Pakrouh of Young Conaway Stargatt & Taylor LLP, and Paul M. Basta, Robert A. Britton, Sarah Harnett and Teresa Lii of Paul Weiss Rifkind Wharton & Garrison LLP.
The case is In re: Templar Energy LLC et al., case number 20-11441, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Marygrace Murphy and Jack Karp.
Update: This story has been updated with more information about Templar's Chapter 11 filings.
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