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SPEAKERSBruce SelkirkPhilip JordanRyan SearsPresident & CEOCrossing Rocks EnergyEnergy PartnerGray ReedEnergy PartnerGray Reed
Energy M&A Market UpdateBruce SelkirkCEO of Crossing Rocks Energy II, LLC
Energy BankruptcyUpdatePhilip JordanEnergy Partner at Gray Reed
ENERGY BANKRUPTCY 213 Upstream Bankruptcies since 2015 60 filings in 2016 42 filings in 2019 23 filings in 2020 (18 since March) Total Debt Value in BK Filings 56.8 Billion in 2016 25.7 Billion in 2019 30.6 Billion so far in 2020
363 SALES 10 sales from 2019 BK filings Alta Mesa (Mid‐Con) White Star Petroleum (Mid‐Con) Approach Resources (Permian) So far only 4 consummated 363 Sales from 2020 BK filings Southland Royalty (San Juan Basin)Echo Energy Partners (Mid‐Con)Templar Energy, LLC (Mid‐Con)Freedom Oil & Gas (Eagle Ford)
FRAUDULENT CONVEYANCE Can be actual fraud or constructive fraud Constructive fraud Seller received less than reasonably equivalentvalue and was insolvent at the time of the transfer or as a result ofthe transfer Risk of assets being clawed back into the BK Estate 2 Year Look back under the BK Code
MIDSTREAM AGREEMENTS Recent Decisions Sabine Badlands Alta Mesa Notable Ongoing Rejection Fights Southland RoyaltySanchez EnergyChesapeakeWhiting (Water Agreement) Unique Aspects of Water Dedications
FARMOUT AGREEMENTS Subject to Rejection? Open question under Texas law Earned Acreage v. Unearned Acreage First Lien Rights
Energy FinanceUpdateRyan SearsEnergy Partner at Gray Reed
ENERGY CAPITAL – WHERE IS IT COMING FROM? Traditional oil and gas lenders are pulling back Banks and Operators are expecting borrowing bases to reduce by double digitpercentages Lower price decks mean less seniordebt available Banks are pushing back and usingexisting revolvers to acquire assets Less reliance on Private Equity Operators are increasingly viewingalternative debt providers as asource of capital over traditionalprivate equity
PDP SECURITIZATIONSAsset backed securities supported by undivided interests in producingoil and gas wells. Yield hungry investors have an appetite for this new asset class: Transactions are characterized by: Large packages of diverse assetsAggressive hedging requirements (75% to 95% for entire term of the notes)Longer time frame from initiation to closingSponsors work to get the bonds rated by a ratings agency (BBB or better)Rates of 5.25% to 7.00%‐‐better than unsecured
PDP SECURITIZATIONS Raisa Energy (EnCap backed) September 2019 Diversified Gas & Oil ‐ 1 November 2019 Created an SPV; Sold 22% of large basket of its assets Diversified Gas & Oil ‐ 2 April 2020 Created an SPV; Sold 29.4% of large basket of its assets
OVERRIDING ROYALTY SALES / VPPSSale of large overriding royalty packages can create immediate liquidityto reduce senior debt, provide drilling or operating capital or both: Antero Resources (June 2020): Sold a large overriding royalty packageto Sixth Street Partners for up to 402 million to repay otherborrowings Range Resources (July 2019): Sold overriding royalty packagescovering 350,000 net acres to Lime Rock Resources and others for 600 million Morgan Stanley (and others) – very active in arranging VPPtransactions presently
SELLER‐FINANCING? EARNOUTS Freedom Oil & Gas – Stalking Horse Bidder PSA:
QUESTIONS?Bruce SelkirkPhilip JordanRyan SearsPresident & CEOCrossing Rocks [email protected] PartnerGray [email protected] PartnerGray [email protected]
Constructive fraud Seller received less than reasonably equivalent value and was insolvent at the time of the transfer or as a result of the transfer Risk of assets being clawed ba
