Natural gas explorer and producer Gulfport Energy Corp filed for Chapter 11 bankruptcy on Nov. 13, becoming the latest company in the U.S. energy sector to succumb to weak crude prices as the COVID-19 pandemic crimps fuel demand.
In a statement on Nov. 14, Gulfport said it has secured $262.5 million in debtor-in-possession financing from its existing lenders under its revolving credit facility, including $105 million in new money that will be available upon court approval.
Weak demand due to the coronavirus pandemic and a price war between major oil producers resulted in a historic plunge in oil prices.
“After working diligently to explore all strategic and financial options available, Gulfport’s board of directors determined that commencing a chapter 11 process is in the best interest of the company and its stakeholders,” David M. Wood, president and CEO of Gulfport Energy, said.
Wood continued: “We expect to exit the chapter 11 process with leverage below two times and rapidly deliver 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.”
As part of the restructuring plan, Gulfport said it expected to eliminate about $1.25 billion in funded debt and significantly reduce annual cash interest expense.
Gulfport had interest payments on its debt due on Oct. 15, Nov. 1 and Nov. 15.
Gulfport said it also received a commitment from existing lenders to provide $580 million in exit financing upon emergence from Chapter 11.
As of Sept. 30, the company had total debt of about $2.5 billion, according to a filing with the United States Bankruptcy Court for the Southern District of Texas.
The company said it would also issue $550 million of new senior unsecured notes under the restructuring agreement to existing unsecured creditors of certain Gulfport subsidiaries.
Kirkland & Ellis LLP and Jackson Walker LLP served as legal co-counsel and Alvarez & Marsal was restructuring adviser to the company.
Work on the tankers could potentially violate sanctions on Venezuela, lawyers say.
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Indonesia says that oil spilled during the transfer.