Sanchez Energy and certain of its subsidiaries have voluntarily filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas.
Sanchez Energy has received commitments from certain of its senior lenders for $175 million in new financing, of which $25 million will be used to repay borrowings and replace a letter of credit currently outstanding under the company’s existing revolving credit facility and, along with cash on hand and cash flow generated by ongoing operations, support the business and fund continued capital investment throughout the restructuring process. According to a related 8-K filing, WSFS will serve as administrative agent for the transaction.
The decision to make this voluntary filing follows an extensive review of strategic alternatives to align its capital structure with the continued low commodity price environment, and Sanchez Energy intends to use this process to substantially reduce its indebtedness and provide the financial flexibility to position for future success. The company has liquidity, comprised of cash on hand and $175 million in new committed financing as described below, to operate in the normal course and intends to interact with its commercial counterparties as usual.
Non-recourse subsidiary SN EF UnSub, LP and certain other unrestricted subsidiaries of the company are not included in these Chapter 11 proceedings.
“Sanchez Energy has assembled a high-quality asset base and has substantial liquidity to continue operating safely and efficiently, while we maintain productive relationships with our business partners and midstream counterparties,” said Tony Sanchez, III, president and chief executive officer of Sanchez Energy.
“Over the last year, we have taken proactive steps to address the challenging oil and natural gas price environment, including stabilizing our production profile, improving our capital efficiency and reducing our overall cost structure. Undergoing a financial restructuring through a voluntary process represents the next phase for Sanchez Energy, as we work with our creditors on a plan to right-size our balance sheet, further invest in our assets and generate long-term value for our stakeholders.”