White Star Petroleum Seeks Bankruptcy Protection

Wall Street Journal – By Becky Yerak White Star Petroleum LLC, founded by late oilman Aubrey McClendon, filed Tuesday for chapter 11, days after unpaid vendors tried to push the energy company into involuntary bankruptcy.

The Oklahoma City-based oil and gas producer also plans to put its assets up for sale, according to a filing in U.S. Bankruptcy Court in Wilmington, Del. The company said it has been stressed financially in recent years, partly due to low production volumes and higher-than-expected operational costs.

The chapter 11 filing comes after lenders reduced access to cash amid failures to make required payments. White Star’s debts include a $274 million secured revolving credit line, a $58 million secured term loan from EnLink Oklahoma Gas Processing LP, and $10 million in unsecured bonds.

Due to the drop in commodity prices late last year, as well as White Star’s financial condition, the business stopped drilling new wells in April, general counsel Jeffrey Zanotti said in a filing.

Existing lenders will provide up to $28.5 million in financing, secured by virtually all of the company’s assets, to help the business get through bankruptcy. White Star has 169 employees, and, at year-end, had the equivalent of 84.4 million barrels of oil in Oklahoma.

Investment bank Guggenheim Securities LLC has been hired to look for a potential buyer for the business, Mr. Zanotti said. White Star’s losses deepened to an estimated $114 million last year, compared with $14 million a year earlier, he said.

White Star, previously known as American Energy – Woodford Holdings LLC, was formed in 2013 by American Energy Partners LP, a platform founded by Mr. McClendon to invest in and manage oil and gas exploration and production companies. In 2016, White Star became a stand-alone company. Its owners include investment firm Energy & Minerals Group LP, Mr. Zanotti said.

“Low production volumes and higher-than-expected production costs, together with allegations that increased saltwater injection by the operators in the area caused increased seismic activity, resulted in many operators reducing activity and many capital providers discounting asset values in the region,” he said.

White Star’s unsecured creditors include Baker Hughes Oilfield Operations LLC, which is owed about $2.4 million. Baker Hughes, a General Electric Co. business, was among the companies that last Friday filed an involuntary bankruptcy petition against White Star in U.S. Bankruptcy Court in Oklahoma City.

White Star and related companies that also filed for bankruptcy are represented by law firms Morris Nichols Arsht & Tunnell LLP and Sullivan & Cromwell LLP. Alvarez & Marsal North America LLC will provide restructuring advice. Judge Brendan Shannon has been assigned to the case, number 19-11179.

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