Vanguard Emerges From Bankruptcy As Grizzly Energy

Vanguard Natural Resources Inc. completed its financial restructuring on July 16, emerging from its second Chapter 11 bankruptcy since the 2014 oil crash as a limited liability company under a new moniker and with a new board.

The Houston-based company has already experienced multiple transformations since its formation as an upstream MLP in 2006, including emerging as a publicly-traded corporation following completion of a prior restructuring in 2017.

Now named Grizzly Energy LLC, the company emerges from bankruptcy with more than $500 million of secured debt eliminated from its balance sheet. Grizzly also has an entirely new five-member board of directors that includes Mike Wichterich, founder and CEO of private upstream company Three Rivers Operating Co.

Besides Wichterich, the remaining members of the Grizzly board of directors are comprised of:

• Kevin Asarnow, executive director at RPA Advisors LLC;
• Patrick Bartels, managing member at Redan Advisors LLC and formerly at Monarch Alternative Capital LP;
• Stephen McDaniel, an oil and gas consultant formerly at EnerVest Ltd.; and
• Dean Swick, a former managing director at Alvarez & Marsal North America LLC.

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The new focus of the company will be on operating long-lived producing properties primarily in the Rockies, Permian Basin and Midcontinent regions. This is in stark contrast to its predecessor, which, despite starting out solely in the Appalachian Basin, ended up growing its portfolio to include positions in nearly every major basin in the Lower 48.

After exiting its 2017 bankruptcy, Vanguard embarked on a strategy to sell nearly 10% of its sprawling portfolio. By April 1, when the company filed for Chapter 11 again, Vanguard’s remaining assets were located the Green River, Piceance, Permian, Arkoma, Gulf Coast, Big Horn, Anadarko, Wind River and Powder River basins, according to a company press release.

“By coring up around established basins, we deeply understand our basins and operating environments,” Grizzly Energy said of its strategy on its new website. “This knowledge allows us to continuously identify low risk capital investments and efficiencies in operating costs.”

Grizzly expects its capex to range between $43 million and $50 million for 2019. The company expenditures will include ongoing drilling and uplift projects in the Arkoma’s Woodford play, the Red Lake area in the Permian Basin and the Pinedale Field of the Green River Basin.

As of June 30, Grizzly held proved reserves of about 1,044 billion cubic feet equivalent, comprised of roughly 64% natural gas, 20% oil and 16% NGL. The company estimates that 91% of the reserves are considered proved developed.

Grizzly will continue to be led by R. Scott Sloan, who was named to succeed the company’s founder Scott W. Smith as president and CEO in January 2018.

In a statement on July 16, Sloan said: “We are very pleased to have completed this reorganization and look forward to working with our stakeholders and board members in charting a course for the company with this firmer financial footing.”

Following its reorganization, Grizzly entered into an amended and restated $65 million reserve-based revolving credit facility, a first lien term loan A facility of $65 million and a “last out” first-lien term loan B facility of $285 million. The company said it had $375 million of funded debt and $47 million of liquidity as of its emergence.

Evercore Partners Inc. served as financial adviser to the company during its restructuring. Kirkland & Ellis LLP was the company’s legal counsel and Opportune LLP served as its restructuring advisers.

Emily Patsy can be reached at epatsy@hartenergy.com.