Oklahoma City-based Seventy Seven Energy, the spin-off from Chesapeake Energy, is the latest Oklahoma energy firm to indicate it will file Chapter 11 bankruptcy, seeking protection from its creditors. In an announcement on Tuesday, the company, headed by Jerry Winchester, chief executive officer, said it had entered into a Restructuring Support Agreement with certain lenders who make up 92 percent of the oustanding principal amount. The announcement indicated the agreement provides for a deleveraging of the company’s balance sheet by converting nearly $1.1 billion of the bond debt into new common equity without interrupting the firm’s daily operations.
The company said its operations will continue and suppliers, contractors and employees will continue to be paid throughout the bankruptcy process. Seventy Seven Energy, in a filing with the Securities and Exchange Commission said it will begin a prepackaged Chapter 11 proceeding on or before May 26.
Lenders of a $650 million 2019 note will receive 96.75 percent of the company’s new common stock to be issued pending a vote by other lenders. The holders of a $450 million 2022 note will vote wheter to accept 3.25 percent of the company’s new common stock.
Seventy Seven Energy suffered, like most energy firms, in the fourth quarter of 2015. The company’s total revenues were nearly $193 million, down from more than $213 million in the third quarter. Losses for the quarter were $61 million on top of the loss of $48 million in the third quarter. Net losses for 2015 full year were more than $221 million.
The company was founded in 2014 as Seventy Seven Energy after it was first held by Chesapeake Energy as Chesapeake Oilfield Operating LLC. When it was formed, the company had 118 rigs and at least 5,200 employees who were moved from Chesapeake Energy to the new firm.