Houston-based oil and gas driller Sanchez Energy Corp. has filed for bankruptcy reorganization, following a review of strategic alternatives to align its capital structure with the continued low commodity price environment.
Sanchez Energy and its subsidiaries submitted voluntary petitions for reorganization under Chapter 11 of the bankruptcy code in the U.S. Bankruptcy Court for the Southern District of Texas. Non-recourse subsidiary SN EF UnSub LP and certain other unrestricted subsidiaries of the company are excluded in these Chapter 11 proceedings.
On July 16, the company announced its intention to delay interest payment on a set of senior notes amid ongoing talks with stakeholders on a restructuring plan. This prompted S&P Global Ratings to downgrade Sanchez Energy's credit ratings.
The company plans to use the bankruptcy process to substantially reduce indebtedness and provide financial flexibility. "Undergoing a financial restructuring through a voluntary process represents the next phase for Sanchez Energy, as we work with our creditors on a plan to right-size our balance sheet, further invest in our assets and generate long-term value for our stakeholders," President and CEO Tony Sanchez III said in an Aug. 11 statement.
Sanchez Energy has secured commitments from certain of its senior lenders for $175 million of new financing. It will use $25 million to repay borrowings and replace a letter of credit currently understanding under its existing revolving credit facility, and along with cash on hand and cash flow generated by ongoing operations, to support the business and fund continued capital investment throughout the restructuring process.
Sanchez Energy is represented by Moelis & Co. as financial adviser, Akin Gump Strauss Hauer & Feld LLP and Jackson Walker LLP as legal counsel and Alvarez & Marsal as restructuring adviser.