Seventy Seven Energy Still Struggling—Voluntary Bankruptcy is Still On the Table

Oklahoma City-based Seventy Seven Energy Inc., the spinoff from Chesapeake Energy a few years ago reported Wednesday a drop in fourth quarter 2015 earnings as well as total revenues for 2015 and an increase in losses. And at the same time, it confirmed that “voluntary bankruptcy” is on the table.

While dealing with losses and lower revenues, Seventy Seven Energy said it still is working with restructuring advisors and also exploring and evaluating various strategic alternatives to reduce its level of long-term debt. It is also trying to lower its future cash interest obligations, including debt repurchases, exchanges of existing debt securities for new debt securities and exchanges or conversions of existing debt securities into new equity securities. The company’s earnings report showed long term liabilities total $1.6 billion, down slightly from 2014.

“The timing and outcome of these efforts is highly uncertain and one or more of these strategic alternatives could potentially be consummated, without the consent of any one or more of our current security holders, through voluntary bankruptcy proceedings,” stated the company in its earnings report.

Company officials said they believe a restructuring of the long term debt is needed to improve the financial position and flexibility and to better position it to take advantage of the growth opportunities that are likely to result from the current industry downturn.

The company released its financial reports showing total revenues of $192.8 million for the fourth quarter of 2015, compared to $213.5 million in the third quarter and $494.9 million for the fourth quarter of 2014.

Total revenues for 2015 were $1.131 billion compared to $2.081 billion for the 2014 full year.

Company officials said the net loss for the fourth quarter of 2015 totaled $60.6 million or $1.18 per fully diluted share. The loss compares to the net loss of $48.5 million or $0.95 per fully diluted share for the third quarter of 2015. The net loss for all of 2015 totaled $221.4 million or $4.42 per fully diluted share. The net loss for all of 2014 was $8.0 million or $0.17 per fully diluted share.

Seventy Seven’s operating costs for the fourth quarter were lower because of declines in labor-related costs—in other words, fewer workers were employed and there were lower repairs and maintenance costs.

General and administrative expenses were down as well totaling $16.7 million in the fourth quarter compared to $26.7 million in the third quarter. They totaled $35.2 million in the fourth quarter of 2014.