Rosehill Resources Inc. entered a restructuring support agreement with its lenders with plans to file for Chapter 11 bankruptcy later this month.

A pure-play Delaware Basin E&P with deep roots in West Texas, Rosehill formed in 2017 following the combination of Tema Oil and Gas Co. with a public blank-check company led by industry veteran Gary Hanna. The company expects to file for Chapter 11 bankruptcy on or before July 15, a release from Rosehill said on July 1.

Through May, 18 E&Ps had declared bankruptcy, according to the Haynes and Boone LLP. However, that number doesn’t include the recent filings of Extraction Oil and Gas Inc., Sable Permian Resources LLC, Lilis Energy Inc. and Chesapeake Energy Corp.—the largest oil company to file for bankruptcy during the current COVID-19 pandemic-related downturn.

“These are extraordinary times in the industry with the pressure on commodity prices driven by the COVID-19 pandemic,” David French, Rosehill’s president and CEO, said in a statement on July 1.

Rosehill has over 13,000 net acres with more than 500 drilling locations across multiple stacked horizons in the Delaware Basin within the prolific Permian Basin. Through February, the company’s average net production for 2020 was approximately 20,900 boe/d.  

In March, Rosehill decided to halt all drilling and completion activity for 2020 due to the state of the global market and its effect on commodity prices. The company also fully drew the amount available under its revolving credit facility in hopes of increasing its cash position and preserve financial flexibility.

At the time, Rosehill said it was fully compliant with all of its financial covenants. The company had $340 million total debt under its credit facility with total cash on hand of $73 million.

“After exploring all strategic and financial options available to Rosehill,” French continued in his July 1 statement, “we are announcing an agreement for a consensual restructuring among the company’s major creditors.”

Rosehill’s restructuring agreement comprises lenders under its revolving first lien credit facility, holders of second lien notes and series B preferred stock, and Tema Oil and Gas Co. According to the company release, Tema holds approximately 66.8% of the equity interests in Rosehill and 35.2% in Rosehill Operating Co. LLC.

Rosehill will move through the restructuring process “expeditiously with minimal operational disruptions,”  French added in his statement, with expectations of emerging from bankruptcy within 75 days of filing.

Additionally, Rosehill intends to terminate the listing of its common stock on the NASDAQ Capital Market “in light of the closely held nature of the restructured company,” according to the company release.

Rosehill will also enter into a proposed $17.5 million junior convertible debtor in possession delayed draw term loan facility as part of the restructuring plan.

Gibson, Dunn & Crutcher LLP and Haynes and Boone LLP are acting as legal counsel to Rosehill in connection with the restructuring. Jefferies LLC and Opportune LLP are the company’s financial advisers.

Onshore