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Energy, Retail Distress Continues

By Kirk O'Neil | Published on September 30, 2019

Financial distress in the energy and retail sectors resulted in more out-of-court restructurings in the third quarter.

The energy sector is still struggling from low oil and natural gas prices, despite the Sept. 14 bombings of the Saudi Arabian crude oil processing plants at Abqaiq and the Khurais oil field, resulting in another wave of out-of-court restructurings by oil and gas companies in the third quarter of 2019.

Retailers also continue to restructure outside of court, while entertainment industry players address their distress situations to avoid Chapter 11.

Pricing for West Texas Intermediate crude receded to $56.50 per barrel on Sept. 26 after spiking about $8 a barrel from $54.85 to $62.90 on Sept. 14 following the bombing of the Saudi Arabia oil facilities. Prices hit a low this year of $51.14 a barrel on June 12.

Henry Hub natural gas prices, however, were not affected by the oil refinery bombing as prices have tumbled to $2.41 per million British thermal units on Sept. 26 after increasing just 7 cents to $2.68 per MMBtu following the refinery bombing. Prices reached a high this year of $3.59 per MMBtu on Jan. 14.

Oil and gas exploration and production companies seeking out-of-court restructurings in the third quarter included Englewood, Colo.-based natural gas company Ultra Resources Inc., which in September amended a credit facility, removed financial maintenance covenants and suspended its natural gas drilling until pricing improves.

Houston-based oil and gas producer Sanchez Energy Corp. in July missed an interest payment on $1.15 billion in senior notes as it sought a comprehensive restructuring.

In addition to oil and gas producers, oilfield services and drilling companies also sought out-of-court restructurings to improve their balance sheets, credit facilities and operations.

Houston-based oilfield services companies Abaco Energy Technologies LLC and Superior Energy Services Inc. in July faced a need to restructure to deal with weak liquidity and cash flow generation, reduction of leverage and debt maturities.

Energold Drilling Corp, which provides drilling services to the energy and mining industries, began considering strategic alternative in July.

More retailers also sought out-of-court restructurings in the third quarter as 99 Cents Only Stores LLC in July finally completed its $289 million debt-for-equity swap and Flint, Mich.-based Diplomat Pharmacy Inc. launched strategic alternatives to address deteriorating performance from its specialty pharmacy and pharmacy benefit management segments.

The entertainment industry addressed financial distress in the third quarter as motion picture and television content creator and distributor Deluxe Entertainment Services Group Inc. in August implemented an out-of-court balance sheet restructuring that could include a distressed exchange.

VIP Cinema Holdings Inc., a company that provides state-of-the-art theater seating to various entertainment venues, entered a forbearance agreement with its first-lien lenders as a default or restructuring appeared inevitable.




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