In filing Chapter 11 bankruptcy Monday, Oklahoma City-based SandRidge Energy listed $4.3 billion in liabilities. And it made it clear, the company’s future was in great doubt had it not filed for financial restructuring.
It also filed a Form 10-Q with the Securities and Exchange Commission, stating, “The Company believes that a filing under Chapter 11 provides the most expeditious manner in which to enhance its liquidity position and effect a substantial reduction in its debt obligations.”
The SEC filing also blamed the energy downturn for opening the door to bankruptcy.
“The market price for oil, natural gas and NGLs decreased significantly beginning in the fourth quarter of 2014, continuing throughout 2015 and into 2016. The decrease in the market price for production directly reduces the Company’s cash flow from operations and indirectly impacts its other potential sources of funds—-.”
Regarding its future, the company stated, “there can be no assurances that the Company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions. As a result of these uncertainties, management has concluded that is substantial doubt regarding the Company’s ability to continue as a going concern as it is currently structured.”
SandRidge explained that it borrowed all of its remaining available capacity under the senior credit facility in January 2016 and in March 2016, the lenders under the senior credit facility elected to reduce the borrowing base to $340.0 million. In turn, SandRidge notified the administrative agent of the senior credit facility that the firm would offer more oil and gas properties to serve as collateral to support a borrowing base of $500 million. On April 20, 2016, SandRidge followed through with the offer of more collateral.
In preparation for Chapter 11, SandRidge entered into a restructuring support and lock-up agreement on May 11 with its lenders under the senior credit facility.