Whiting files for Chapter 11 bankruptcy as oil prices hover at $20

(Reuters) – U.S. shale producer Whiting Petroleum Corp (WLL.N) said on Wednesday it filed for Chapter 11 bankruptcy, the first major casualty of a free fall in crude prices to $20 a barrel.

The recent slump in oil prices has left producers scrambling to restructure their debt as the economic fallout of the coronavirus pandemic and an oil price war between Russia and Saudi Arabia have led to a 50% drop in crude prices since the beginning of March.

Once the largest oil producer in North Dakota’s Bakken region, the company has seen its market capitalization shrink to $61.5 million from as much as $15 billion at its peak in 2011, when investors were first discovering the burgeoning shale sector.

Whiting said on Wednesday that it reached an agreement with some of its creditors to cut its debt by about $2.2 billion through an exchange of some of its notes for 97% of new equity in the reorganized company. Existing shareholders will own 3% of the reorganized company.

The company had $2.8 billion in debt as of Dec. 31 and more than $585 million in cash on its balance sheet.

Whiting, which was expected to produce about 42 million barrels of oil equivalent in 2020, said it would continue to operate its business in the normal course without material disruption to its vendors, partners or employees.

It currently expects to have sufficient liquidity to meet its financial obligations during the restructuring without the need for additional financing.

Reuters reported recently that Oklahoma energy producers Chesapeake Energy Corp (CHK.N) and Chaparral Energy Inc CHAP.N> as well as natural gas producer Gulfport Energy Corp (GPOR.O) are all working with debt restructuring advisers or investment banks to shore up their cash reserves.

Shares of Whiting were down 44% at 37 cents in morning trading. It is among the most shorted oil and gas stocks, with more than 60% of its outstanding shares borrowed for short selling.

Moelis & Company is Whiting’s financial adviser, while Alvarez & Marsal is its restructuring adviser.

PJT Partners is acting as financial adviser for creditors.

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