Swift Energy Ends 2015 on Low Bank Note
Swift Energy Co. has filed for Chapter 11 bankruptcy, making the move many had long expected finally official on New Year’s Eve.
By its own admission, Swift is carrying a debt load of more than $1.2 billion and skipped an $8.9 million December interest payment on its outstanding $250 million in principal. Nonpayment within 30 days would consequently result in default.
Company leadership agreed with a majority of its senior noteholders to convert its equity into $75 million of debtor-in-possession to provide liquidity during the restructuring process. Existing equity holders will receive warrants for up to 30 percent of the post-petition equity exercisable if the company reaches certain benchmarks under terms of the restructuring. The company also intends to restructure, amend or refinance its pre-petition $330 million secured revolving credit facility as part of its plan of reorganization.
As the last energy bankruptcy filing of 2015, Swift followed dozens of others in restructuring, including Sabine Oil & Gas Corp., Quicksilver Resources and Samson Resources Corp. Insiders say that will oil prices in the doldrums, more bankruptcies are all but guaranteed.
CEO Terry Swift said in a statement the company had to take action in response to the precipitous drop of oil and gas prices.
“We expect that Swift will exit bankruptcy with a greatly improved balance sheet and additional liquidity to realize the full potential of our assets for all stakeholders, while having sufficient funding to maintain, if not improve our asset base during the Chapter 11 process,” he said.
Aubrey Earl Swift founded the company in Houston in 1979, with a 10-well drilling program in West Virginia – its earliest attempts at hydraulic fracturing, which remained a key operation throughout the company’s nearly four decades of incorporation. In 1981, Swift took the company to the people with an initial public offering. During the 1990s, the company shifted much of its work to exploration and drilling development and managed to weather fluctuations in commodity prices, according to court documents. In 2012 and 2013, Swift exceeded its all-time record highs for volume of year-end reserves. Much of its works has been conducted in South Texas’ coveted Eagle Ford basin.
Dean Swick, appointed chief restructuring officers for the Swift’s proceedings, said in a filing the company has implemented an array of strategies to stave off bankruptcy, including the use of advanced technologies and focusing its resources on core production areas.
Swick, who has advised several energy companies in 2015 restructuring proceedings, including Hercules Offshore, Samson Energy and Seahawk Drilling, explained that was simply not enough.
“However, despite these achievements in the early part of this decade, declines in the prices of oil and natural gas have hurt performance in recent years. In 2012, a nationwide decline in natural gas prices and relatively flat oil prices resulted in decreased revenues,” Swick said a court filing. “Additionally, increased costs and expenses driven primarily by increasing production in the highly competitive south Texas area and greater workover costs in southeast Louisiana contributed to decreased cash flows and net income.”
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