Latium Group in Talks About Emerald Oil Bid
Dow Jones Newswires
March 23, 2016 12:15 ET (16:15 GMT)
Sabine Oil & Gas Corporation (USOTC:SOGCQ)
British businessman and rugby club owner Brian Kennedy's Latium Group is in talks about leading the bidding at a bankruptcy auction of Emerald Oil Inc., which develops oil and gas wells in North Dakota.
Emerald filed for chapter 11 protection Tuesday night, the latest in a long string of oil and gas companies to crumble in the face of low oil prices. Court papers say Latium Group and Emerald signed a nonbinding term sheet for a deal that could set the pace for a bankruptcy competition over the business. Mr. Kennedy has bought, sold and operated businesses in the energy and home improvements sectors, among others, and owns the Sale Sharks Rugby Union Club.
"The Latium transaction would allow the business to continue to operate and would provide a sound path for potential recovery for company stakeholders," McAndrew Rudisill, president and chief executive, said in a release.
A representative of Mr. Kennedy couldn't immediately be reached to discussion the potential deal.
Existing lenders that have offered to finance Emerald Oil's bankruptcy are demanding that the business be sold by July 22, court papers say.
Based in Denver, the independent exploration and production company acquires acreage and develops wells in the Williston Basin of North Dakota.
Only about a quarter of the rigs in the once-booming area are operating today compared with a year ago, according to a filing by Emerald chief financial officer Ryan Smith.
In court papers, Emerald blamed its financial woes on the same steep decline in oil and gas prices that meant bankruptcy for, among others, Magnum Hunter Resources Corp., Swift Energy Co., American Eagle Energy Corp., Quicksilver Resources Inc., Saratoga Resources Inc., Sabine Oil & Gas Corp., Energy and Exploration Partners LLC and Samson Resources Corp.
The commodity price drop not only slashed revenues from oil and gas that was produced, but it also chopped into the value of reserves, particularly undeveloped reserves. Those losses put the debt and equity capital markets out of reach for Emerald. By the middle of January, Emerald was out of time to negotiate an out-of-court restructuring with leading creditors, court papers say.
It filed for bankruptcy protection "rather than remaining under the constant threat of impending creditor remedies while hoping for an immediate turnaround in both the global commodities and capital markets," Mr. Smith, the CFO, wrote in a filing with the U.S. Bankruptcy Court in Wilmington, Del.
As of Dec. 31, 2015, Emerald estimated its assets were worth about $291 million, a figure that includes only $28 million in current assets, Mr. Smith wrote in an affidavit. Liabilities add up to about $337 million, including funded debt of about $260.5 million.
Emerald owes about $111 million on bank loans and is carrying about $148.5 million in bond debt, court papers say. The company also has nearly $5 million worth of responsibility for closing off shut down operations to avoid environmental damage, according to court papers.
Patrick Fitzgerald contributed to this article.
Write to Peg Brickley at peg.brickley@wsj.com
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