By Greg Avery Reporter, Denver Business Journal – Denver-based oil company Whiting Petroleum is seeking Chapter 11 bankruptcy protection, the first of what experts predict could be several U.S. shale company bankruptcies if oil prices remain low.
Whiting Petroleum Corp. (NYSE: WLL) and its subsidiaries will reorganize the company’s debt and capital structure, and it will continue to operate the business as a debtor-in-possession, the company said Wednesday.
The Chapter 11 filing, in a federal bankruptcy court in southern Texas, is made in advance of what the company called a “consensual plan of reorganization” agreed to by some of Whiting Petroleum’s debt holders. The plan contemplates some transactions to restructure the business, the filing said.
The company didn’t specify what the transactions would be.
Whiting Petroleum employs about 575 people. It drills and produces oil and gas primarily in the Bakken oil basin of North Dakota. It also operates some wells in the Denver-Julesburg Basin of northeast Colorado.
It has been among investors’ most-watched independent shale oil companies because of its struggle to generate free cash while oil prices are low, and because of the amount of its debt that matures in the coming months.
Crude oil prices have plummeted this year as the COVID-19 pandemic sapped global demand, and as Saudi Arabian and Russian oil producers battle for market share and increased production in an already glutted oil market.
Whiting Petroleum’s Chapter 11 filing comes two days after the company drew on a $650 million line of credit to fund its operations and established a new shareholder rights provision to protect $3.4 billion worth of potential tax credits it has built up.
After tapping the credit line, Whiting said it has “more than enough liquidity to continue its daily business and satisfy obligations to its employees and vendors with minimal interruption.”
The Chapter 11 filing constitutes a default on $962 million of debt notes slated to be repaid this year and in 2021, and on another $1.4 billion to be repaid in installments in 2023 and 2026. The filing also constitutes a default on a $1.1 billion line of credit, Whiting’s notice to the U.S. Securities and Exchange Commission said.
Under the reorganization plan, Whiting’s non-executive employees are expected to be paid 25% of their target compensation in installments scheduled for March 31, Oct. 31, and Dec. 31, the company’s SEC filing said.
The plan called for Whiting executives to be paid their full target compensation immediately to promote stability in leadership during the reorganization, though the payments are subject to clawback and other provisions over the next 12 months if the executive leaves the company without good reason or is fired, the company’s SEC filing said.
That translates into $6.4 million paid to Brad Holly, chairman, president, and CEO; $2.2 million for CFO Correne Loeffler; $2.9 million for COO Charles “Chip” Rimer; and $2 million Bruce DeBoer, chief administrative officer, general counsel, and secretary.
Whiting also, as of Tuesday, no longer employs Timothy Sulser, who had been Whiting’s chief strategy officer, the company said. Sulser was due to receive a little over $1 million in compensation under the Chapter 11 reorganization plan, the company’s filing said. It’s not clear whether or not his departure from the company affected that payment.
Source: By Greg Avery Reporter, Denver Business Journal