The U.S. Securities and Exchange Commission is investigating the Houston oil and gas company Alta Mesa Resources for potential fraud amid admitted failures in its financial reporting, the company said Friday in a regulatory filing.
The one-year-old company, put together by the former chief executive of Anadarko Petroleum with the backing of private equity money, was already struggling to survive following a $3.1 billion write-down of its assets attributed to undisclosed flaws in its financial accounting. The company has declined to elaborate on the nature of its internal financial errors.
The company has laid off roughly one-third of its 200 employees this year. With its stock trading at 18 cents a share as of Friday, the company’s market value has plunged to just over $30 million from more than $3 billion early last year.
Alta Mesa said is considering a potential bankruptcy filing in the months ahead as it deals with defaults on loan agreements and delisting warnings from the Nasdaq stock exchange, Alta Mesa acknowledged Friday a belated annual report filing with the SEC. Alta Mesa has yet to report its first quarter earnings, but said in its filing that it estimates a $13 million loss for the first three months of the years.
The company already is in default on some of its loan agreements for failing to report its first-quarter earnings by mid-May. It has more than $1 billion in debt and could soon faced defaults on more of its loans, the company said in the filing. Discussions with its lenders are ongoing.
Alta Mesa said it is cooperating with the SEC investigation and could face civil penalties. The company said it is working to fix its internal controls and financial reporting, but there’s no set timeline for successfully implementing a new system.
The SEC does not comment on ongoing investigations.
Alta Mesa Chairman James Hackett continues to serve as the interim chief executive since the company’s previous CEO, chief operating officer and chief financial officer all abruptly resigned in late 2018 and earlier this year. Hackett served as CEO of Anadarko from 2004 to 2012; one of the twin towers at Anadarko’s headquarters in The Woodlands is even called Hackett Tower.
Hackett led the formation of the new Alta Mesa, although he initially took a backseat role as chairman. Alta Mesa was put together by Hackett’s acquisition entity, known as a blank-check firm, which was backed by Riverstone Holdings, an energy-focused private equity firm.
To create the new Alta Mesa, Hackett’s Silver Run Acquisition Corp. II combined with two privately held companies, Alta Mesa Holdings and Kingfisher Midstream, both of which focused on Oklahoma oil and gas acreage and pipelines. The company began trading in early 2018 under the “AMR” stock ticker, touting an aggregate Wall Street value of $3.8 billion.
Alta Mesa also is facing a series of lawsuits. Some shareholders are suing claiming they were defrauded and lied to about the value of the company and its assets when the company was formed. And some landowners are suing for alleged breaches of their minerals leases and for failing to fix alleged property contamination from its operations.
Texas Lawbook extra: Kimberly O. Warnica is Alta Mesa’s general counsel and chief compliance officer. She worked previously as assistant GC at Marathon Oil Corporation and started her career at the Houston law firm Andrews Kurth, which is now Hunton Andrews Kurth.
Two lawyers serve on Alta Mesa’s board of directors:
Don Dimitrievich is a managing director at HPS and is responsible for the energy and power portfolio. He is a former lawyer in the New York office of Skadden, Arps. Sylvia J. Kerrigan served as executive vice president and GC of Marathon Oil Corporation from 2012 to 2017.