Plano-based oil and gas producer Denbury Resources will seek bankruptcy court approval of an agreement with creditors that’ll eliminate the company’s $2.1 billion in bond debt.
The company said Wednesday that it intends to file for voluntary Chapter 11 bankruptcy by Thursday in a “prepackaged” deal with debt holders. The goal of such deals is to speed up how long companies remain in bankruptcy.
Denbury expects to continue normal operations through the bankruptcy process, with existing lenders putting up $615 million in financing to support the company that operates primarily in the Gulf Coast and Rocky Mountain regions.
CEO Chris Kendall said in a statement that COVID-19 has crushed demand for oil and gas producers, creating record low prices and “rapid changes in energy market conditions.”
“In response to this extraordinarily difficult business environment, we have taken multiple proactive steps at Denbury to preserve liquidity, including by reducing our capital spending and general and administrative costs and optimizing operations,” Kendall said.
It intends to fully pay suppliers for goods and services, the company said.
Denbury’s bankruptcy filing comes after the company skipped two multimillion-dollar interest payments in recent months -- $8 million in June and $3 million in July -- as it searched for ways to restructure its debt.
The company has been struggling this year, raising doubts as early as May about its ability to continue operations as “a going concern.” It said at the time that it had “substantially diminished” ability to repay, refinance or restructure $584.7 million in debt that’s due to be repaid in 2021.
Denbury reported a 20.7% drop in revenue for the first three months of this year. Its revenue fell to $242 million, down from $305 million in the same period a year earlier. It also cut capital spending by 44%, reduced operating and overhead costs and restructured fixed-price deals to increase its protection against oil price declines.
“This is in addition to many similar actions taken by the company over the last several years as we navigated significant oil price volatility and made consistent progress in reducing leverage,” Kendall said. “However, even after taking these steps, it became apparent that a comprehensive financial restructuring would be necessary to address our legacy debt burden and create a clear path forward.”
Denbury was the 67th largest public company in Dallas-Fort Worth last year, with $1.3 billion in revenue. It has 718 employees.
