Saratoga Resources Inc. (NYSE MKT: SARA) has filed voluntary Chapter 11 petitions for itself and certain operating subsidiaries in the US Bankruptcy Court for the Western District of Louisiana in Lafayette.
Saratoga intends to continue to operate its business and manage its properties as debtors in possession. At this time, Saratoga believes it has sufficient cash to operate its businesses in the immediate term without need for debtor-in-possession financing.
The June 18 bankruptcy filing follows earlier challenges relating to the company’s field operations coupled with the precipitous decline in oil and gas prices which resulted in lower than projected revenues and profitability and an unexpected arbitration award against the company. Exhaustive initiatives have been undertaken in Saratoga’s field operations, remedying many of the earlier operating issues, and an ongoing cost containment program is bringing down operating costs to address the lower commodity price environment. Production optimization initiatives and infrastructure improvements undertaken during the last 12 months have addressed the principal causes of decreased run times, gas lift gas shortages, mechanical issues, and flow line capacity constraints.
Thomas F. Cooke, Saratoga’s chairman and CEO, said, “We have been working closely with our secured lenders to try to address liquidity issues with a view to either restructure or repay existing debt and preserve collateral from hostile action arising from the outstanding arbitration award and have retained advisors to assist in the evaluation of potential alternatives to either restructure or repay the existing secured debt. We have also engaged in discussions with Harvest Operating, the holder of the adverse arbitration award totaling $3.7 million, and are pursuing separate legal claims against Harvest Operating which may ultimately offset, in part or in whole, the arbitration award. Without an acceptable resolution of the arbitration award, our management and our principal lenders determined that a court-administered reorganization would offer the best means of addressing the arbitration claim and the company’s existing debt structure and realizing the anticipated benefits of our drilling, workover and recompletion program.
“We hope to use the Chapter 11 process to avert adverse action by Harvest Operating while still permitting us to pursue our legal claims against Harvest Operating, as well as to arrive at a satisfactory restructuring or retirement of our existing secured debt while continuing to develop our holdings, grow our production and revenues and reduce our operating expenses,” Cooke said. “We appreciate the support of our employees, vendors, business associates and stockholders. We want to assure them that we intend to continue doing business while we complete the processes before us and expect that a vast majority of our suppliers, vendors and business associates will see no disruption in our business. We believe that our long-term prospects remain solid, that we continue to have substantial untapped reserves, and that our development program will continue to increase daily production. The process we have undertaken will better allow us to realize the full value of our properties for the benefit of both our creditors and our stockholders and position us to benefit from what we expect is an inevitable recovery in oil and gas prices.”