Breitburn completes Chapter 11 process, becomes Maverick

June 2018 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

June 2018 Issue

After nearly two years, Breitburn Energy Partners has wrapped up its long-running Chapter 11 reorganisation, emerging as the newly formed Maverick Natural Resources LLC, under the management of private equity group EIG Global Energy Partners.

As a result of the restructuring process, Maverick has debts of around $105m, down from the $2.96bn debt load previously carried by Breitburn. The company also has around $295m of additional borrowing capacity under a new bank credit facility.

Breitburn and a number of its subsidiaries filed for Chapter 11 bankruptcy in May 2016 amid an alarming period for the energy industry in the US. The dramatic fall in oil prices in 2014 created strong headwinds for many firms operating in the space. Breitburn, like many others, was overleveraged, relying too heavily on the high price of crude oil to survive. When the price of crude crashed from above $100 per barrel to around $40, more than 100 companies, including Breitburn, were forced to file for bankruptcy.

Maverick’s new portfolio includes roughly 1 million gross acres and 11,500 gross wells across the Midwest, Ark-La-Tex, Rockies, California, Permian Basin, Southeast and Midcontinent regions. In 2017, the company operated at around 88 percent of its production and averaged 39,742 boe/d. Estimated proved reserves are 152.2 million boe, 97 percent of which are proved developed reserves with a proved reserve life index averaging more than 10 years.

Maverick has a five-member board of directors comprised of company chief executive Halbert S. Washburn, Clayton Taylor, the managing director of EIG, EIG president William C. Sonneborn, EIG managing director Terence Jupp and Jeff Serota, vice chairman of Corbel Capital Partners.

“We are pleased to close this chapter and focus on generating value for the Maverick platform,” said Mr Taylor in a statement. “Maverick will emerge with low leverage, a simple balance sheet and sufficient liquidity to remain adaptive to the ever-changing market conditions. Following a judicious review of the asset portfolio and cost structure, we believe Maverick is well-positioned to capitalise on cost reduction initiatives, to deploy capital to high growth prospects and to potentially build the platform through strategic acquisitions.”

“The Chapter 11 reorganisation marks a new beginning for our company and all of our stakeholders and the end of a difficult period managing through the steep and sustained decline in oil and natural gas prices,” said Mr Washburn. “Throughout the extended restructuring process, we remained focused on our key goals of managing production and reducing costs to preserve the value of our diverse and long-lived portfolio, substantially reducing debt and dramatically improving our liquidity position, and achieving a consensual plan of reorganisation among our key creditor groups.”

EIG is no stranger to the energy market. The firm specialises in private investments in energy and energy-related infrastructure and has $17.7bn under management as of 31 December 2017. The firm has a strong global investment presence, having invested over $25bn in more than 320 portfolio investments in 36 countries.

Breitburn had hoped to exit bankruptcy sooner, however the bankruptcy judge handling the case rejected its plan to divide into two separate creditor-owned companies. He said some of the terms of the plan discriminated against retail bondholders. Institutional bondholders were recovering more than twice the amount offered to individuals holding the same bonds, who were getting 4.5 cents on the dollar. The company’s bondholders were opposed to the plan and voted against it.

Lime Rock Resources also made an unsolicited $1.8bn cash offer for the company that was rejected by Breitburn during the Chapter 11 process.

Richard Summerfield