Houston-based Sable Permian Resources is the latest oil producer to file for Chapter 11 bankruptcy in Houston federal court.
The company’s voluntary petition, filed Thursday, did not have a check mark next to the box that says it’s entering bankruptcy with a pre-negotiated plan.
Sable Permian General Counsel John Wombwell has hired Timothy “Tad” Davidson, Joseph Rovira and Ashley Harper from Hunton Andrews Kurth’s Houston office to handle the restructuring. Lawyers from Latham & Watkins’ New York, Los Angeles and Chicago offices are co-leading the effort (George Davis, Jeff Bjork and Caroline Reckler).
Latham also has a number of Houston-based partners working on the bankruptcy, including Michael Dillard, Trevor Lavelle, Michael Chambers, Lauren Anderson, Michael King and Chris Bennett.
Wombwell has been with Sable Permian since 2017. Before that, he had general counsel stints at Freeport-McMoRan Oil & Gas and Plains Exploration & Production. Before going in-house, Wombwell was a partner at Andrews Kurth.
Sable Permian is part of the American Energy family of companies, which was founded by the late Aubrey McClendon, the ousted CEO of Chesapeake Energy who died in 2016. Chesapeake is also expected to file for bankruptcy any day.
Sable Permian was born in May 2017 out of a restructuring transaction in which its predecessor company, Permian Resources, entered a series of investment transactions with The Energy & Minerals Group, OnyxPoint Global Management and Sable Management (the sponsors). Sable Petroleum pursued the transactions after facing “adverse market and liquidity conditions” in order to “optimize their liquidity position and balance sheet,” Sable Permian Vice President of Corporate Development Anthony Duenner said in a court filing.
But the continuous struggle of depressed commodity prices from the 2016 oil crash, among other factors, caused the company to enter another restructuring deal in August 2019 that involved an exchange offering and a $700 million revolving credit facility with J.P. Morgan Chase Bank, the court filing said. While that helped, liquidity challenges surfaced again due to the Saudi-Russia oil pricing war and the spread of the COVID-19 virus.
That caused J.P. Morgan to slash Sable Permian’s borrowing base by nearly half to $415 million, but that didn’t mean the company’s debts went away.
“Due to their quickly declining financial liquidity positions and upcoming debt payments, the debtors are left with no viable option other than to commence these Chapter 11 cases,” Duenner said in the filing.
Sable Permian and its eight affiliated companies involved in the bankruptcy say in their voluntary petition that they owe more than $1 billion in debt but less than $10 billion. Its assets are listed in the same range, though Duenner revealed in his filing that the company only has $48 million in “unrestricted” cash on hand.
The company has between 10,000 and 25,000 creditors.
The largest unsecured creditor (surprise, surprise) is Wilmington Trust, which holds $28 million worth of Sable Permian’s 7.125% unsecured debt notes, the payment of which is due this year. US Well Services is the second largest unsecured creditor, and is owed $17.5 million. Coming in at No. 3 is Halliburton, which says it’s owed $11.6 million. Other colleagues of the energy industry that are creditors include WTG Fuels, Gravity Oilfield Services, Chevron and Archrock Services.
Porter Hedges partner John Higgins IV has appeared on the docket as the lawyer for the ad hoc group of senior secured noteholders. Davis Polk & Wardwell is also involved for the noteholders.
Houston DOJ lawyer Stephen Douglas Statham is representing the U.S. Trustee.
Other Texas lawyers who have already made an appearance on the docket on behalf of creditors include Haynes and Boone’s Kenric Kattner on behalf of The Energy & Minerals Group, Quinn Emanuel’s Patricia Baron Tomasco on behalf of OnyxPoint Permian Equity Aggregator/OnyxPoint Permian Preferred Holdings, Perdue Brandon Fielder Collins & Mott’s Laura Monroe on behalf of the Crockett County Tax Office and Miller Mentzner Walker’s Julie Ann Walker on behalf of J-W Power Company.
The case has been assigned to U.S. Bankruptcy Judge Marvin Isgur of the Southern District of Texas.
In addition to the law firms, Sable Permian has retained Evercore Group to guide the company through its Chapter 11 as its investment banker, Alvarez & Marsal North America to provide financial advisory services and Prime Clerk to provide noticing and claims agent services.
Sable Permian specified in its filings that Latham is providing restructuring and legal guidance, whereas it hired Hunton AK to “assist in the preparation and conduct of a potential Chapter 11 proceeding.”
Davidson has filled that role for multiple companies recently. Companies he is currently guiding through Chapter 11 include Permico Midstream Partners and Canada-based ENTREC — although, the latter is technically a Chapter 15 case that’s serving as a sister proceeding in the U.S. to the main corporate reorganization in Canada.
Davidson was also on the corporate reorganization of Weatherford International, which emerged out of Chapter 11 in December, four months after the process began. Hunton AK and Latham were also co-counsel on that bankruptcy.