Oil Driller Rosehill Hits Ch. 11 As Pandemic's Latest Victim

By Rick Archer
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Law360 (July 27, 2020, 11:20 AM EDT) -- Oil and gas driller Rosehill Resources Inc. hit Chapter 11 in a Texas bankruptcy court Monday with a prepacked $106 million debt swap plan, saying it was yet another victim of oil price wars and the COVID-19 energy plunge.

The Houston-based company said in an announcement Monday it has secured $17.5 million in debtor in possession financing that it said will allow it to continue operations as it works to restructure its $362 million in debt.

Rosehill is an oil and gas exploration company with wells primarily in the Delaware Basin region of west Texas. At first-day hearings Monday, counsel for Rosehill told the court it currently holds an interest in 133 oil and gas wells, 47 of which have been shut down this year due to low energy prices. The company currently has 30 employees, they said.

In its Chapter 11 filings, the company said as of Monday it had about $29 million in cash, $326.4 million in secured debt, $11.8 million in royalty obligations and $24.5 million in unsecured debt.

At the hearing, Rosehill counsel David Feldman said the "rapid and precipitous drop" in oil prices caused by the Russia-Saudi Arabia price war and the COVID-19 pandemic meant the company was running nearly $28 million in the red as of May, and in his Chapter 11 declaration, Chief Financial Officer R. Craig Owen said the company has "struggled" to meet its quarterly debt obligations.

Feldman said the company responded by cashing out its commodities hedges to partially pay down its revolving loan facility and beginning "at times very vigorous" talks with creditors, resulting in a restructuring agreement that was announced July 1.

The company said under the plan that the holders of $106.1 million in secured notes will receive 68.6% of the reorganized company, with the DIP lenders — those same noteholders and equity holder Tema Oil and Gas Company — receiving another 21.15%. Tema will receive just under 4.1% by itself for proving the DIP backstop, while preferred shareholders will receive just under 1.5% if their class votes to approve the plan.

Under the terms of the plan, the lenders for the revolving loan facility, on which Rosehill currently owes $226.4 million, will issue a new $235 million facility and unsecured creditors will be paid in full, the company said.

At the hearing, U.S. Bankruptcy Judge David Jones gave conditional approval for the plan disclosure statement and approved the initial $8.75 million draw on the DIP and set a Aug. 28 confirmation hearing, in accordance with the milestones set by the DIP.

The company said it has retained Jefferies LLC and Opportune LLP as financial advisers.

Rosehill is represented by Kelli S. Norfleet and Arsalan Muhammad of Haynes and Boone LLP and David M. Feldman, Matthew K. Kelsey, Dylan S. Cassidy, Hillary H. Holmes and Shalla Prichard of Gibson Dunn & Crutcher LLP.

The case is In re: Rosehill Resources Inc. et al., case number 20-33695, in the U.S. Bankruptcy Court for the Southern District of Texas.

--Editing by Alyssa Miller.

Update: This story has been updated with additional information from the first-day hearing.

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

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