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July, 2016

Goodrich and Halcon News from the TMS 7-29-16

Posted by bernell on July 29, 2016

There are four news items to report today related to two different companies in the Tuscaloosa Marine Shale.

First up is Halcon Resources is currently fracking the Halcon Franklin PST Prop H-1 in Tangipahoa Parish, but located adjacent to and due south of Osyka, Mississippi.  The well was drilled to a depth of roughly 18,000 foot in December 2014, but has not been fracked until now.  For those wanting to keep up with official reports on this well, here is a link to this well’s info site with the Louisiana Department of Natural Resources:

It is also noteworthy that Halcon Resources filed for reorganization bankruptcy this week.  Here is a note about this bankruptcy included in its 2nd quarter annual report.

“Restructuring Update

As previously announced, the Company has filed for an accelerated pre-packaged bankruptcy under Chapter 11 of the bankruptcy code to affect a comprehensive balance sheet restructuring.  Halcón anticipates emerging from bankruptcy 45 to 60 days from the date of filing.  The Company expects its common shares to continue to be listed on the NYSE during bankruptcy although no assurance can be made that this will be the case.  Halcón plans to operate as usual during the restructuring process and will continue to pay all royalty owners, suppliers and vendors in full consistent with normal terms.”

Shifting gears to Goodrich Petroleum here are two news items from this company

  1. Goodrich is scheduled to send payments in early September of 2016 for February, 2016 production royalties and other past due and undisputed royalties due as of April 15, 2016 when bankruptcy was filed. It is my understanding these old payments will be included in with the normal royalty payments due for June, 2016 production.

  2. Goodrich has obtained financing to continue in business and plans to remove itself from bankruptcy as soon as possible.  Here is an excerpt from legal documents filed with the court the SEC:

“On July 25, 2016, the Debtors entered into a commitment letter agreement (the “Commitment Letter”) with Shenkman Capital Management, Inc. (acting on behalf of such of its investment advisory clients as it deems appropriate, “Shenkman”), CVC Capital Partners (acting through such of its affiliates or managed funds as it deems appropriate, “CVC”), J.P. Morgan Securities LLC (acting through such of its affiliates or managed funds as it deems appropriate, “JPM”) and Franklin Advisers, Inc. (acting through such of its affiliates or managed funds as it deems appropriate, “Franklin”, and, together with Shenkman, CVC and JPM, the “Commitment Parties”) under which the Commitment Parties severally (but not jointly) commit to provide financing to the Company upon its exit from bankruptcy on the terms and conditions set forth in the Commitment Letter (the “Exit Financing”).

Pursuant to the Commitment Letter, the Company will issue Convertible Senior Secured Second Lien Notes in an aggregate principal amount of $40 million (the “Convertible Second Lien Notes”). The Convertible Second Lien Notes will mature on the later of August 30, 2019 or six months after the maturity of the Company’s Second Amended and Restated Credit Agreement, but in any event no later than March 30, 2020. Interest on the Convertible Second Lien Notes will accrue at a rate of 13.5% per annum and be paid quarterly in cash or in kind by adding to the principal (the “Additional PIK Principal”) at the option of the issuer. The aggregate principal amount of the Convertible Second Lien Notes (excluding any Additional PIK Principal) will be convertible at the option of the Commitment Parties at any time prior to the scheduled maturity date into an amount of common stock equal to 15% of the common stock of the reorganized company. Upon closing, the Commitment Parties will be issued 10-year costless warrants for common stock equal to 20% of the common stock of the reorganized company, will take a second priority lien on all assets of the Debtors, and will have the right to appoint two members to the board of directors of the reorganized company.

The commitments of the Commitment Parties to purchase the Convertible Second Lien Notes are subject to certain conditions set forth in the Commitment Letter. However, there can be no assurances that such conditions will be satisfied or waived (if applicable). In addition, the Exit Financing is subject to execution of a definitive loan facility by the Company at closing.

The Commitment Letter is subject to the approval of the Bankruptcy Court and the terms of such Commitment Letter will be binding on the Company at the time of such approval.”

What do you think about it?