Yuma Energy has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Texas. The company said its cash position deteriorated in the first quarter of 2020 and its cash flow from operations was no longer sufficient to cover its operating costs.
It was seeking court approval to hold an auction “for substantially all” of its assets, it said. The auction is expected to occur in the first 90 days of the bankruptcy. The assets are primarily properties in Louisiana, Texas, Wyoming, and Oklahoma.
Yuma said it may negotiate for new debtor-in-possession financing but was not certain those negotiations would be successful. The company plans to continue to operate its business in the normal course during the bankruptcy process.
“Our revenues and cash position have eroded to the point of unsustainability primarily driven by the severe downturn in oil prices,” the company’s former CEO and CFO, Anthony Schnur, said in a statement. “After much consideration, the company’s Board of Directors came to the decision that the use of the Chapter 11 liquidation process was the best path forward to maximize values and recoveries.”
Schnur resigned as interim CEO and CFO on April 10. He will continue to oversee the debtors through Ankura Consulting Group, which was retained by Yuma as its financial adviser.
Schnur said Yuma had recapitalized its financial structure through credit and restructuring agreements with its lender, YE Investment, and with Red Mountain Capital Partners, but YE recently notified Yuma it was terminating the credit agreement and accelerating all payments due to Yuma’s failure to make timely interest payments and comply with covenants. Red Mountain also terminated its restructuring agreement.
YE Investment, an affiliate of Red Mountain, announced it had purchased all of Yuma’s senior secured bank debt in September 2019.