Extraction Oil & Gas voluntarily filed for petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. In connection with the filing, Wells Fargo Bank underwrote a $125 million debtor-in-possession financing facility, which contemplates $50 million in new money — up to $15 million of which will become immediately available upon the court’s order — and a “roll up” of $75 million of revolving loans under Extraction Oil & Gas’ existing revolving credit agreement. The $50 million in new money is financed by certain lenders under the company’s existing revolving credit agreement. Subject to court approval, this DIP financing, combined with the company’s cash from operations, is expected to provide sufficient liquidity during the Chapter 11 cases to support the company’s continuing business operations and minimize disruption.
Further, to facilitate Extraction Oil & Gas’ exit from Chapter 11, the company entered into a restructuring support agreement with certain of its unsecured noteholders. The agreement outlines a restructuring plan that will effectuate a deleveraging of the company’s balance sheet through a debt-for-equity swap, pursuant to either a standalone restructuring or a combination transaction, that will leave the debtors’ unsecured noteholders with the majority of the company’s equity while still providing a recovery to junior stakeholders. Although Extraction Oil & Gas was unable to obtain consensus across its entire prepetition capital structure prior to filing, the company plans to use the Chapter 11 process to build consensus for a restructuring transaction that will allow the company to emerge from Chapter 11 with a right-sized, flexible balance sheet.
“After months of liability management and careful analysis of our strategic options, we determined that a voluntary Chapter 11 filing with key creditor support provides the best possible outcome for Extraction,” Matt Owens, CEO of Extraction Oil & Gas, said. “The restructuring steps we have announced today are necessary to strengthen our balance sheet, improve our overall cost structure and position Extraction for future success.
“I would like to thank our customers, employees, suppliers and partners for their support through the COVID-19 pandemic. We are working tirelessly on expediting an efficient in-court restructuring that will allow us to maintain our operational momentum and uphold the obligations we have to our employees, customer[s], vendors and stakeholders.”
Kirkland & Ellis is serving as legal counsel to Extraction Oil & Gas. Moelis & Company and Petrie Partners are acting as financial advisors to the company. Alvarez & Marsal is acting as restructuring advisor to the company.
Extraction Oil & Gas is an independent energy exploration and development company focused on exploring, developing and producing crude oil, natural gas and NGLs primarily in the Wattenberg Field in the Denver-Julesburg Basin of Colorado.
