After a year of failed restructuring efforts amid the oil price plunge, Goodrich Petroleum filed bankruptcy on Friday to implement an agreement with bondholders that will eliminate about $400 million in debt from its balance sheet.
The Houston-based oil and gas producer is the third energy company to enter Chapter 11 this week, following Energy XXI and Peabody Energy. The restructuring agreement, which was announced earlier this month, will leave it with only about $40 million in debt outstanding.
“The execution of the [agreement] and today’s filing reflect the company’s next step in its efforts to respond proactively in a depressed commodity environment,” Goodrich said in a news release.
As part of the deal, bondholders, who include Franklin Advisors, Penn Capital Management, and Jefferies LLC, have agreed to forgive $175 million in debt in exchange for ownership of the company.
Goodrich, which operates in Texas, Louisiana and Mississippi, has spent the past year trying to reduce leverage and raise liquidity to weather low prices. In January, it offered to exchange newly issued shares of common stock for unsecured debt and preferred stock, but the offer expired April 8 with the minimum tender conditions having not been met.
Owners of only 62% of the debt tendered their notes to be exchanged and holders of only 43% of preferred stock tendered their shares to be exchanged. The required minimums were 95% of the debt and a majority of the preferred stock.
Energy XXI’s reorganization plan also involves a debt-for-equity swap with a group of bondholders. Ian Peck, a bankruptcy attorney at Haynes & Boone, told The Wall Street Journal that the rising number of such swaps reflects to lenders’ unwillingness to accept the fire-sale prices that potential buyers are offering for oil assets.
The question is “are these new owners — the banks and bondholders — willing to hold the equity as long as it takes?” Peck said. “Or will they need to liquidate their positions?”
Crude oil began its slide from above $100 a barrel in mid-2014 and, despite a recent rebound, is still trading at close to $40 a barrel.