Oilfield Company in Fortworth Aims to Reduce Debt through Pre-packaged Bankruptcy

by San Antonio Attorney

Basic Energy Services, an oilfield services company based in Fort Worth, was set to file for bankruptcy on November 8.  The company has been working with their creditors in reducing their debt following the drop of oil prices worldwide.

The affected creditors include secured term loan lenders and senior unsecured bondholders.  These creditors were amenable to a reorganization plan of Basic Energy along with its subsidiaries, according to an official statement filed by the company last week.  A reorganization plan is typically filed by a Chapter 11 debtor.

The reorganization plan aims to reduce debt and liquidate $125 million.  The timetable stipulates that Basic Energy should have a court filing by November 8.  The company aims to exit bankruptcy before the start of year 2017.

The holders of unsecured notes worth $775 million will receive almost 99.5 percent of the equity of Basic Energy.  The existing shareholders will receive 0.5 percent initially.  A representative of Basic Energy said that these stakes will be diluted further according to the terms and conditions of the reorganization plan.

Almost 100 oilfield services companies in North America have experienced bankruptcy from 2015 to 2016.  The primary cause of bankruptcy is due to the falling prices of oil, according to a survey conducted by Haynes and Boone law firm.

Basic Energy gave notice through a recent filing last July 29 that it was unable to maintain operations due to heavy debt.  Basic Energy failed to fulfill an interest payment worth $18.4 million last August.

Roe Patterson, the chief executive officer of Basic Energy, said that the prolonged period of low commodity prices resulted in the disruption of cash flow in the company’s operations.  Despite bankruptcy filing, Basic Energy will maintain operations following their role as debtors-in-possession under the jurisdiction of the Bankruptcy Court.  The company aims to maintain staffing as the process of financial restructuring begins.

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