Oasis Petroleum Hits Ch. 11 With Plan To Cut $1.8B In Debt

By Elise Hansen
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Law360 (September 30, 2020, 11:13 AM EDT) -- Oasis Petroleum filed for Chapter 11 protection on Wednesday with a plan in hand to slash $1.8 billion in debt, telling a Texas bankruptcy court that COVID-19 and the plunge in energy demand drove it to bankruptcy.

The ongoing COVID-19 pandemic and a decrease in demand has sent several oil and gas companies into bankruptcy in recent weeks. Oasis Petroleum is the latest, seeking Chapter 11 protection on Wednesday with $1.8 billion in debt. (Angus Mordant/Bloomberg via Getty Images)

Oasis Petroleum Inc. and eight affiliates said they are aiming for a quick turnaround in bankruptcy court and hope to emerge from Chapter 11 in November. The effects of the COVID-19 pandemic and the drop in energy prices made restructuring the best option to deal with its debt load, Oasis said in an accompanying announcement Wednesday.

"Due to historically low global energy demand and commodity prices, we determined that it is best for Oasis Petroleum to take decisive action to strengthen our liquidity and overcome the headwinds now challenging both our company and industry," CEO Thomas B. Nusz said in a statement.

Texas-headquartered Oasis is an exploration and production company focused on crude oil and natural gas. Its development and production activities are concentrated in North Dakota and Montana, with some oil and gas properties in Texas' Delaware Basin, according to court filings.

Oasis Midstream Partners, which operates as a master limited partnership, is not part of the Chapter 11 cases, and Oasis' upstream operations are also expected to continue as usual, the announcement said.

Oasis said it has roughly $2.3 billion in debt, including the $1.8 billion in unsecured notes and convertible notes. As the pandemic roiled markets, Oasis and its lenders amended its lending facility, ultimately cutting its borrowing base from $1.3 billion to about $600 million, the filing said.

Those changes in combination with the pandemic made Oasis' business unsustainable in the long run, the filing said.

"As an [exploration and production] company, the debtors' business is capital intensive, and without sufficient access to capital, the debtors' business would be substantially harmed over the long term, absent some proactive action on the part of the debtors to address their capital structure," the filing said.

Oasis in September entered a grace period regarding about $32 million in interest payments due on its unsecured notes, the filing noted.

Oasis' restructuring plan would reduce $1.8 billion worth of debt from its senior unsecured notes and senior unsecured convertible notes, according to court filings. Under the terms of the deal, unsecured noteholders would receive all of the common equity in the newly reorganized company, although those holdings could be diluted by management incentive plans and the issuance of convertible warrants, the filings said.

Oasis said it also negotiated $450 million in debtor-in-possession financing to help it continue operations during the Chapter 11 process, as well as an exit facility of up to $575 million.

The prepackaged plan has the support of "substantially all" of the lenders of its revolving credit facility and the holders of about 52% of the principal amount of its bonds, the announcement said.

Oasis said it does expect to have funds available for unsecured creditors.

Oasis also said it has agreed to settle a long-running lawsuit with Mirada Energy LLC. Mirada sued Oasis in 2017 for over $100 million, saying Oasis had breached some of the parties' joint operating agreements on a midstream infrastructure project in North Dakota.

Facing bankruptcy, Oasis said it reached a settlement with Mirada that will see Oasis pay $42.75 million and that both parties have agreed to wide-ranging releases.

Oasis is represented by Vienna Flores Anaya, Matthew D. Cavenaugh, Bruce J. Ruzinsky and Jennifer F. Wertz of Jackson Walker LLP and by Brian Schartz, Chad J. Husnick, David L. Eaton, John Luze and AnnElyse Scarlett Gains of Kirkland & Ellis LLP.

Wells Fargo Bank NA is represented by a Vinson & Elkins LLP team led by partners Erec Winandy, Bill Wallander and James Longhofer and counsel Brad Foxman, in collaboration with counsel Farah Paliwala, senior associate Garrick Smith and associates Brittany Simington and Matt Struble.

The case is In re: Oasis Petroleum Inc., case number 20-34771, in the U.S. Bankruptcy Court for the Southern District of Texas.

--Editing by Alyssa Miller.

Update: This story has been updated with more details and with counsel information for the parties.

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

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