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Law360 (August 21, 2020, 11:11 AM EDT ) Arena Energy filed a prepackaged Chapter 11 plan in Texas that will see the oil and gas exploration company sell off its assets in order to cope with over $1 billion in funded debt.
Arena Energy LP, which focuses on oil and gas exploration in the Gulf of Mexico, had been struggling to cut down on its more than $1 billion in outstanding and funded debt, as well as "significant" plugging and abandonment liabilities, before filing its prepackaged Chapter 11 plan. (AP Photo/Dario Lopez-Mills)
Arena had been struggling to cut down on its more than $1 billion in outstanding and funded debt, as well as "significant" plugging and abandonment liabilities, according to court filings. Earlier discussions with stakeholders took on a new urgency as COVID-19 dented energy demand and the price war between Saudi Arabia and Russia hit energy prices, the filings said.
The restructuring support agreement has the support of more than 72% of its first-lien revolving facility lenders and about 94% of its second-lien lenders, according to the company's declarations. The "cornerstone" of the agreement is a deal to sell all its assets to San Juan Offshore LLC, the filings said.
The "cornerstone" of the agreement is a deal to sell all its assets to San Juan Offshore LLC, an entity formed by Arena's co-founder and CEO Mike Minarovic alongside an affiliate of private equity firm Lime Rock Partners, the filings said.
The assets will be sold as a "going concern" to avoid potential abandonment costs, which could have reached about $530 million, the filings said.
The plan will also allow unsecured claims to remain unimpaired, and the company said it does expect to have funds available for distribution to unsecured creditors.
Arena is seeking a quick court schedule, with a proposed voting deadline of Aug. 28 and a combined hearing in late September.
"The debtors seek to consummate a transaction as expeditiously as possible given the debtors' current cash position and inability to arrange additional financing sources," the filing said.
Arena joins a slew of energy companies filing for bankruptcy in recent months as the pandemic and energy price drops take their toll. London-based offshore drilling contractor Valaris PLC filed for Chapter 11 protection earlier this week with $7.1 billion in debt, just days after Oklahoma-based oil and gas company Chaparral Energy Inc. filed a Chapter 11 petition for the second time in five years.
Arena is represented by Matthew D. Cavenaugh and Genevieve Marie Graham of Jackson Walker LLP.
Lime Rock is represented by a Willkie Farr & Gallagher LLP team including partners Jennifer Hardy, Michael Piazza, Bruce Herzog, Steve Torello and counsel Jonathan Curth.
The case is In re: Arena Energy LP et al., case number 20-34215, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.
--Additional reporting by Katie Pohlman and Rose Krebs. Editing by Rebecca Flanagan and Katherine Rautenberg.
Update: This story has been updated with additional information about the filing and with additional counsel information.
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