Templar Energy Starts Ch. 11 With Interested Bidders

By Vince Sullivan
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Law360 (June 2, 2020, 6:12 PM EDT) -- Bankrupt oil and gas exploration company Templar Energy kicked off its Chapter 11 case Tuesday in Delaware with as many as nine indications of interest from potential buyers as it seeks to liquidate its assets.

During a first-day hearing conducted via phone and video conferencing, debtor attorney Robert A. Britton of Paul Weisw Rifkind Wharton & Garrison LLP said Templar had been struggling under a significant debt load since last year, and the continued degradation in energy commodity prices forced it to explore a sale prior to the Chapter 11 filing.

Through that prepetition marketing process, Templar's investment banker contacted nearly 150 potential buyers, and the company had nine bids in hand when it filed its petition Monday, Britton said.

"Our marketing process is ongoing, and we remain in active negotiations with several bidders," Britton said.

The company came to court with a prepackaged plan of liquidation that will see Templar sell off its more than 2,100 wells in Texas and Oklahoma to repay lenders under a reserve-based lending facility. Given the terms of the prepetition indications of interest received by Templar, Britton said it is clear that the RBL lenders — owed $437 million — will not be paid in full.

Templar intends to file bidding procedures that will allow it to identify a stalking horse bidder to set a floor price for the assets by June 26, according to Britton, with a July 6 bid deadline and a July 9 auction, if necessary. A combined hearing on the Chapter 11 plan and the sale transaction will be sought for July 14, about six weeks after the case began.

The proposed plan envisions the payment in full of all priority and administrative claims, all claims under a $25 million debtor-in-possession package being provided by some of the RBL lenders and the payment of nearly all unsecured claims in the ordinary course of business.

U.S. Bankruptcy Judge Brendan L. Shannon granted interim approval of the DIP loan Tuesday, making $10 million of new money lending available to the debtor along with a roll-up of a $12.5 million portion of the prepetition RBL debt. Another $2.5 million in new money will be available if the DIP is granted final approval.

Templar filed for Chapter 11 protection June 1 after a prolonged downturn in the oil and gas pricing market came to a head with a  nosedive in demand during the COVID-19 outbreak and an ongoing pricing war among other oil-producing nations, according to court filings.

Having borrowed $437 million under the RBL facility, an April 2019 recalculation of the value of its reserves caused a significant drop that set the value below the amount already borrowed.

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 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 Abbie Sarfo.

For a reprint of this article, please contact reprints@law360.com.

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