COVID-19 Pushes Energy Data Biz SAExploration Into Ch. 11

By Elise Hansen
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Law360 (August 28, 2020, 11:07 AM EDT) -- Energy data and logistics company SAExploration sought Chapter 11 protection in Texas with a plan in hand to slash about $74 million in debt, saying the COVID-19 pandemic has cancelled and delayed its projects.

SAExploration Holdings Inc. and four affiliates filed their petitions in the Southern District of Texas on Thursday, reporting between $1 million and $10 million in assets and $100 million and $500 million in liabilities. SAExploration provides seismic data, logistical support and data processing to oil and gas customers across the globe, according to its first-day declarations.

The pandemic-induced plunge in demand for oil has forced the company to cancel or delay some of its projects, and it's not clear when they might resume, the filing said.

"The debtors' project visibility has continued to deteriorate as certain of their scheduled and anticipated projects have recently been cancelled or delayed and there is no assurance as to when they may be reinitiated or awarded, if at all," the filing said. "The debtors are unable to predict when market conditions may improve and worsening overall market conditions could result in additional reductions of backlog and bids outstanding."

The reorganization plan contemplates a $15 million exit term loan, a second-lien exit facility of $20.5 million, and swapping about $89 million in debt for equity, among other measures, SAExploration said.

The plan has the support of the holders of roughly all its secured debt under a credit agreement, the holders of about 82% of its secured debt under a term loan, and the holders of all its secured debt in the form of convertible notes, the filing said.

The company's largest unsecured creditor is Wilmington Savings Fund Society, which has a $60 million claim stemming from convertible notes, according to the petition. SAExploration also has a $6.8 million loan through the Paycheck Protection Program, part of the federal government coronavirus relief package.

SAExploration said it was facing a number of business challenges aside from the pandemic. Its shares were delisted from the Nasdaq in June for failing to maintain the minimum stockholders' equity requirement, and the company is also facing a proposed class action from shareholders over its regulatory disclosures.

The U.S. Securities and Exchange Commission and the U.S. Department of Justice have been investigating the company's handling of revenue recognition and tax credits, and the Alaska Department of Revenue is also examining certain state tax credit claims, the Chapter 11 filing said.

SAExploration said it has taken a number of steps in recent years to cut debt and bolster its cash levels, including selling off its Australia business and the seismic data from some of its surveys.

While the company did generate net income in the first half of the year, it still faced a $33.2 million stockholders' deficit as of June 30 and is in default on many of its debt obligations, the filing said. Negative cash flows are likely to continue given the current market conditions, according to the company.

"The debtors anticipate negative cash flows from operating activities to begin to occur again in the second half of 2020 and continue for the foreseeable future due to, among other things, the significant uncertainty in the outlook for oil and natural gas development as a result of the significant decline in oil prices since the beginning of 2020 due to the COVID-19 coronavirus pandemic and its impact on the worldwide economy and global demand for oil," the filing said.

An SAExploration representative told Law360 that many other companies in the industry were under similar pressures.

"The industry as a whole is facing some of the same challenges with the uncertainty globally of the pandemic and the decrease in oil prices," the representative said.

SAExploration is the latest of numerous energy-related companies to cite the pandemic as a tipping point into bankruptcy. Chaparral Energy Inc. said in its Aug. 16 petition that its latest visit to Chapter 11 was prompted by the industry downturn amid COVID-19, and oil drilling company Hermitage Offshore Services Ltd. said Aug. 12 that the pandemic contributed to its bankruptcy filing alongside 28 affiliates.

A representative for SAExploration did not immediately respond to a request for comment Friday.

SAExploration is represented by Eric Michael English, John F. Higgins IV and Michael Shane Johnson of Porter Hedges LLP.

The case is In re: SAExploration Holdings Inc., case number 20-34306, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.

--Additional reporting by Alyssa Aquino, Rose Krebs, Jeannie O'Sullivan, Keith Goldberg and Michelle Casady. Editing by Alyssa Miller.

Update: This story has been updated with more details from the company's filing and with comment from a company representative.

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