Emerald Oil Inc. (NYSE MKT: EOX) has filed voluntary Chapter 11 petitions in the US Bankruptcy Court for the District of Delaware, initiating a process intended to preserve value and accommodate an eventual going-concern sale of Emerald's business operations.
Emerald has obtained $20 million in post-petition debtor in possession financing, which, subject to bankruptcy court approval, will provide the company with liquidity to maintain its operations in the ordinary course of business during the Chapter 11 process.
Prior to the Chapter 11 filing, Emerald executed a non-binding term sheet with Latium Enterprises Inc. pursuant to which Latium has proposed to purchase all of Emerald's assets and, subject to lender and bankruptcy court approval, would serve as a "stalking horse" in a sale process under Section 363 of the Bankruptcy Code. The term sheet is non-binding and such transaction is subject to, among other things, Latium's performance of certain due diligence analysis and the parties negotiating mutually acceptable terms of definitive transaction agreements. Emerald intends for such a sale, if consummated, to ensure a smooth and swift transition of the business and operations to Latium, which would be supported by a stronger balance sheet due to a significantly lower debt burden.
If acquired by Latium as part of the anticipated transaction, the Emerald business would expect to be able to remain committed to continued operations in North Dakota. In accordance with the sale process under Section 363 of the Bankruptcy Code, notice of the proposed sale to Latium would be given to third parties and competing bids solicited. An independent committee of Emerald's board of directors will be established to, in consultation with an independent investment bank and a financial advisor, manage the bidding process and evaluate bids.
Emerald intends to continue its normal business operations throughout the sale process and has asked the bankruptcy court to approve certain company requests to protect employees, trade creditors, vendors, and suppliers, thereby allowing for its operations to continue uninterrupted during the bankruptcy-court-supervised sale process.
Like other exploration and production companies, Emerald's operations have been impacted by the decline in oil prices, the continued low prices of oil and natural gas, and the uncertainty in the energy markets. These macro-economic factors, coupled with Emerald's debt obligations, resulted in the company's decision to explore strategic restructuring alternatives to reduce its debt and achieve a sustainable capital structure. Over the last nine months, Emerald presented multiple solutions to its lenders to solve the company's current financial condition; however, it was unable to obtain the requisite lender consent. Emerald continues to discuss alternatives with its stakeholders and believes that an in-court sale process will maximize value and position Emerald for future profitability.
Intrepid Partners LLC is serving as investment banker for Emerald, while Kirkland & Ellis LLP is serving as legal counsel. Opportune LLP is serving as financial advisor, with Wade Stubblefield, of Opportune, serving as chief restructuring officer.
Emerald is focused on acquiring acreage and developing wells in the Williston Basin of North Dakota and Montana, targeting the Bakken and Three Forks shale oil formations and Pronghorn oil sand formation.