Even as Gulfport Energy Corp. made the Sunday Oklahoman’s list of top major companies in Oklahoma, the Oklahoma City company filed for Chapter 11 bankruptcy this week.
Its Nov. 13 filing in U.S. Bankruptcy Court in Houston, Texas showed the firm declared nearly $2.5 billion in liabilities as of Sept. 30. The filing showed that the largest unsecured creditor is UBM Financial Corp. which holds about $1.8 billion of notes due 2023 to 2026.
In a Saturday announcement, the company headlined the release by stating it had entered into a restructuring support agreement for a pre-arranged plan of reorganization to reduce its debt by approximately $1.25 billion “and significantly improve its cost structure.”
The company announcement stated that the restructuring support agreement was made with “over 95% of its revolving credit facility lenders and certain noteholders” who hold more than two-thirds of the outstanding principal amount of its senior unsecured notes.
Gulfport said it expects to not only eliminate the $1.25 billion in funded debt but “significantly reduce annual cash interest expense going forward.” The company also plans to issue $550 million of new senior unsecured notes to existing unsecured credits of some of its subsidiaries.
“Certain of Gulfport’s noteholders have committed to backstop a minimum new money investment of $50 million in the form of convertible preferred stock. The RSA is designed to allow Gulfport to move through the restructuring process as expeditiously as possible,” stated the company in its announcement.
Gulfport President and CEO David M. Wood said the company’s leadership team, one reconstituted in 2019, had taken decisive actions to streamline the business and strengthen its balance sheet. But it was apparently too late to avoid Chapter 11.
“Despite these efforts, our large legacy debt burden in addition to significant legacy firm transportation commitments created a balance sheet and cost structure that was unsustainable in the current market environment,” he stated in the announcement.
Wood also displayed optimism in the weekend news release.
“We expect to exit the chapter 11 process with leverage below two times and rapidly delever thereafter due to a much-improved cost structure driven by reduced legacy firm transport commitments and costs. These improvements will significantly improve our ability to generate cash flow and value for our stakeholders going forward.”
A warning from the company was made in August as it continued struggling with debt created well before the COVID-19 pandemic. After activist investor Firefly Value Partners pressed Gulfport to change its board, the company warned it might not be able to remain afloat without refinancing of its debt.
Gulfport is only the latest oil and gas company in a long list that has filed bankruptcy since 2015, according to a report from the Haynes and Boone law firm. Company shares traded as high as $3.38 in December 2019 but on Friday, shares made a 4% gain to only 24 cents.
