The Houston oil producer Alta Mesa Resources filed for bankruptcy protection Thursday amid collapsing finances and an SEC investigation into possible fraud.
The shale oil startup, led by a former Anadarko Petroleum chief executive, plunged from $3 billion Wall Street value in early 2018 to just $30 million and trading for 8 cents a share.
It was a dramatic fall from grace after significantly overestimating its potential in Oklahoma’s STACK shale play and other regions.
The company failed to stay afloat after laying off much of its 200 employees and writing down the value of its assets by $3.1 billion as it acknowledged undisclosed internal financial flaws. Although the company hasn’t detailed the problems, Alta Mesa has admitted to failures in its financial reporting to the U.S. Securities and Exchange Commission.
Oil and gas bankruptcy filings are back on the rise in 2019 with middling oil prices and limited access to new capital as Wall Street sentiments sour on the industry. About 40 energy companies have filed for bankruptcy this year, already exceeding the aggregate debt totals of a year ago. And more filings could be on the horizon with many struggling companies facing maturing debt payments in 2020 and beyond.
For Alta Mesa, the company has been on the verge of bankruptcy for several months as Chairman Jim Hackett, who previously headed Anadarko, had also assumed the interim CEO role.
“We believe that the Chapter 11 process provides the best pathway for Alta Mesa Resources and Alta Mesa Holdings to restructure their respective balance sheets and to regain the financial flexibility necessary to develop their large position in the STACK in a manner that will maximize value for all their stakeholders,” Hackett said Thursday.
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 note: Latham & Watkins and Porter Hedges are advising Alta Mesa in the bankruptcy proceedings.
Latham’s team is led by partners based outside of Texas but includes Houston partners Catherine Ozdogan, Michael Dillard, Debbie Yee, John Greer and Mike King and associates Trevor Lavelle and Jim Cole. The Houston-based Porter Hedges team includes partners John Higgins, Eric English and Aaron Power and associate M. Shane Johnson.
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