Roiled by financial issues in recent years, Abraxas Petroleum this week announced a comprehensive restructuring that will transform the company into a pure-play Delaware Basin company.
Among the restructuring moves was repayment of all of its revolving credit facility and the exchange of its entire Second Lien Term Loan held by Angelo Gordon Energy Funding LLC into newly authorized Series A Preferred Stock.
“Simply put, we had too much debt (first and second lien) and were constantly tripping bank covenants which resulted in higher interest and reduced operating flexibility,” Steve Harris, Abraxas vice president and chief financial officer, told the Reporter-Telegram by email. “Further, as opposed to a costly bankruptcy, which would likely result in little to no equity value for shareholders our out-of-court restructuring provides us an opportunity to grow the company as an unlevered – or low-levered – E&P company for shareholders, which also, we believe, makes us a more attractive merger partner.”
The company also announced the cash sale of its Williston Basin assets to Lime Rock Resources for $87.2 million, leaving Abraxas to focus on its Delaware Basin assets.
“We loved our Bakken asset, but it was very mature and we couldn’t afford to keep both,” explained Harris. “The Delaware Basin asset also has the bulk of our future drilling inventory plus multiple productive horizons vs. the Bakken.”
According to Harris, Abraxas has about 12,000 net acres with all depths and rights, all held by production and 95 percent operated with high net revenue interest. Production is about 2,000 barrels of oil equivalent per day from 22 company-drilled Wolfcamp/Bone Spring horizontal wells. The company also has more than 400 future drilling locations, two company-owned saltwater disposal wells and an office and shop in Pyote.
Harris said Abraxas now has plans “to develop the asset at a measured and responsible pace – i.e. within cash flow. Industry has performed a lot of the ‘science experiments’ for us so we’re seeking to build off of that knowledge to further our plans, which should be completed sometime soon.”
In announcing the restructuring, Bob Watson, Abraxas president and chief executive officer said in a statement, “For some time, Abraxas has been trying to find a solution that would resolve the indebtedness held by our lenders while at the same time providing continuing opportunity for our stockholders. The transactions announced pay off all of our bank debt and convert AG's 2L Term Loan into preferred equity. Most importantly, the restructuring positions Abraxas as an unlevered, Delaware Basin pure play that can now access available capital sources to restart a drilling program in the Permian Basin. In short, we now have the opportunity to drill and complete wells in order to grow our production for the benefit of our common and preferred stockholders.”
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January 08, 2022 at 07:38PM
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Abraxas restructures into pure-play Delaware Basin company - Midland Reporter-Telegram
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