The drop in oil and natural gas prices has forced Samson Resources Corp. to consider Chapter 11 bankruptcy protection. The Tulsa, OK-based oil and gas producer, acquired by a group of investors in 2011 spearheaded by private equity firm KKR, said in a filing Tuesday that, while it is considering asset sales and securing additional debt, a bankruptcy filing may offer “the most expeditious manner in which to effect a capital structure solution.”
The company’s debt has grown from $3.9 billion on December 31 to $4.2 billion at the end of February and a net loss of $1.6 billion was recorded for its third fiscal quarter in 2014. Cash on hand at February’s end was reported as $220.7 million. To improve financials, the company, active across the Rockies, Mid-Continent and East Texas, has employed a variety of measures, including divestitures and various budget cuts.
Arkoma basin assets were monetized for $48 million, but the marketing of certain Bakken, Wamsutter, San Juan, Permian Minerals and non-core Mid-Continent assets did not result in sales.
The company has also cut its workforce. Thirty percent of the company's employees were laid off in March. Headcount in Tulsa was reduced by 196 employees last week, and according to the filing, a field operations personnel evaluation is currently being conducted and additional reductions are expected in the coming weeks.
Following the filing, Standard & Poor's Ratings Services lowered its corporate credit rating on Samson Resources Corp. to 'CCC-' from 'CCC+'. The outlook is negative. S&P also lowered its rating on subsidiary Samson Investment Co.'s unsecured notes to 'C' from 'CCC-'. Samson Investment Co. ranked No.2 in the January OGFJ100P listing of top privately-held companies in terms of production. S&P noted the recovery rating on the unsecured notes remains '6', indicating an expectation of negligible (0% to 10%) recovery in case of a payment default.
"The downgrade on Samson reflects that we believe that the company could restructure its debt, reorganize under Chapter 11 of the Bankruptcy Code, or miss an interest payment without unanticipated significantly favorable changes in the company's circumstances," said Standard & Poor's credit analyst Stephen Scovotti.