Stone Energy Says Bankruptcy Filing a Possibility
1:27 PM ET 5/17/16 | Dow Jones
By Stephanie Gleason
Stone Energy Corp. is working to negotiate a restructuring deal that could include a prepackaged bankruptcy, the company said after skipping a payment to bondholders.
The Lafayette, La., oil-and-gas company said Monday that it wouldn't make a $29 million interest payment due to senior bondholders with $775 million in bonds maturing in 2022. Rather, the company is entering a 30-day grace period under its bond agreement and plans to use the time to negotiate a bondholder-supported plan that may include a bankruptcy filing.
"The company is in the process of analyzing various alternatives to address its liquidity and capital structure, including strategic and refinancing alternatives through a private restructuring, asset sales and a prepackaged or prearranged bankruptcy filing," Stone said in a financial filing Monday.
Like so many peers, Stone's finances have suffered under the weight of low prices. The company said that prices it realized during the first quarter averaged $36.87 per barrel of oil, $13.01 per barrel of natural gas liquid and $2.22 per million cubic feet of natural gas. During the same period in 2015, when prices already had begun to decline, Stone averaged $66.28 per barrel of oil, $18.11 per barrel of natural gas liquids and $2.54 per million cubic feet of natural gas, it said.
The decision to skip the payment and enter time-sensitive negotiations with bondholders comes as Stone also announced that it has elected to repay a borrowing base deficiency over the next six months. Stone said it made the first payment, $29.2 million, on May 13.
Earlier this month, lenders reduced Stone's revolving credit facility to $300 million from $500 million. With more than $457 million in drawn and $18.3 million in letters of credit on the facility, Stone had a few choices to make up the $175.3 million deficiency, including the six-month repayment plan.
Stone announced a few weeks ago that it had begun negotiations with lenders and bondholders regarding strategic alternatives, but it didn't point to bankruptcy specifically as a possibility. In March, the company hired Lazard as its financial adviser and Latham & Watkins LLP as its legal adviser.
In its first-quarter earnings statement released recently, Chief Executive David Welch said the company had achieved some operational successes in the quarter and had drawn down its credit facility to give it more financial flexibility.
The company reported operational earnings of $80.7 million for the quarter and a net loss of $188.8 million, which included a $129.2 million impairment. During the same period last year, Stone had $153.5 million in operating revenue and logged a $327.4 million net loss. The company has an overall debt load of more than $1.5 billion.
Careful with this one
