Natural gas exploration and production company EdgeMarc Energy Holdings and its subsidiaries commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware, to facilitate a sale of substantially all of the company’s assets.
In conjunction with the proposed transaction, EdgeMarc received a commitment for approximately $108 million in debtor-in-possession financing from KeyBank, its primary existing lender, which includes $30 million in new money financing and approximately $78 million of “roll up” loans to refinance all outstanding debt owed to KeyBank. Upon court approval, the new financing and cash generated from the company’s ongoing operations will be used to support the business throughout the Chapter 11 proceedings and sale process.
Callum Streeter, EdgeMarc’s CEO, stated, “Since the explosion of the Revolution pipeline in 2018, EdgeMarc’s production has been significantly curtailed and the company has been unable to satisfy its long-haul firm transportation contracts. Following a comprehensive review of all possible alternatives to ensure the company’s long-term ability to develop our natural gas and NGL rich assets, the EdgeMarc Board and management team have determined that a sale is the best path forward for all stakeholders. This process will provide the necessary resources and flexibility to resume normal upstream operating activities at our well sites in Pennsylvania and Ohio.”
In 2015, Energy Transfer entered into the Revolution project, a long-term gas gathering, processing and fractionation agreement with EdgeMarc, which would provide EdgeMarc with effective gathering and processing for a significant inventory of lateral locations in Butler County, PA. On September 10, 2018, an explosion occurred within a segment of the Revolution pipeline system in Beaver County, PA. Immediately following the incident, Energy Transfer shut down part of the Revolution pipeline, affecting production from the producing wells in the area.
EdgeMarc intends to implement the sale under Section 363 of the U.S. Bankruptcy Code, which will allow the company to provide for an orderly sale of its assets in a court-supervised environment. EdgeMarc has submitted auction procedures to the court for approval. Under those procedures, the auction of substantially all of EdgeMarc’s assets is expected to take place on or prior to August 14, 2019, although that date is subject to change. EdgeMarc expects all of its operations and well sites that are not contracted with the Revolution pipeline to operate without disruption during the sale process. Customers, lessors and employees of those operations should see no interruption as a result of this process.
EdgeMarc has filed a number of customary motions with the court seeking authorization to support its operations during the court-supervised process, including authority to continue to pay employee wages and provide health and other benefits, and to pay vendors, lessors and other business partners. The company expects to receive court approval for these requests.
Davis Polk & Wardwell and Landis Rath & Cobb are serving as legal advisors, Evercore as investment banker and Opportune as financial advisor to EdgeMarc.