By Soma Biswas
Ultra Petroleum Corp., one of the largest oil and natural-gas drillers in Wyoming, filed for bankruptcy Friday, after struggling with nearly $2 billion of debt left on its books after its previous restructuring amid a historic slump in energy prices.
The Englewood, Colo.-based company filed for chapter 11 in U.S. Bankruptcy Court in Houston with a plan to slash $2 billion in debt, most of which it took on when it emerged from bankruptcy in April 2017.
The new deal, a so-called prepackaged bankruptcy, has the backing of 85% of Ultra's senior lenders and 67% of its second-lien, or junior, lenders. Under the prepackaged bankruptcy plan, Ultra aims to exit chapter 11 within three months.
Creditors who have signed on to the company's restructuring plan are Avenue Capital Management II LP, Bain Capital Credit LP, Goldman Sachs Group Inc.'s Special Situations Investing Group, Citadel Advisors LLC and GoldenTree Asset Management LP, court filings show.
After trying to persuade its bondholders to restructure their debt out of court last year, the company decided to pursue a plan under court protection, said Brad Johnson, Ultra's chief executive, in a filing with the court.
Ultra sought protection from creditors after skipping a $13 million interest payment due last month to bondholders.
The company was already struggling before the coronavirus pandemic kicked off a historic crash in oil prices. Last year, energy companies were flooding the market with cheap shale gas, depressing prices. In 2019, Ultra sought relief from its lenders in terms of having to hit certain earnings targets.
Ultra's bankruptcy highlights the failure of a popular investing strategy in the last oil bust in 2016, when many hedge funds scooped up the debt of distressed energy companies at low prices and then backed them with hundreds of millions of dollars in new investments.
A group of hedge funds backed Ultra's exit from bankruptcy in 2017 with $580 million in equity and $2.4 billion in debt, much of which will be wiped out under the prepackaged plan.
Ultra's existing lenders are providing a $60 million loan to the company when it exits bankruptcy. The company also plans to raise $85 million from senior lenders through a rights offering, which will fund recoveries for the company's other creditors.
Ultra is the latest in a series of oil-and-gas companies that have filed for bankruptcy this year, among them Whiting Petroleum Corp., Southland Royalty Co. and Sheridan Holding Company I LLC. More than 200 oil and gas drillers have filed for bankruptcy since prices nosedived five year ago, according to Texas law firm Haynes & Boone LLP.
The driller operates oil and gas rigs in the Pinedale field, one of the largest development areas for natural gas in the U.S., and the Jonah field in southwest Wyoming, producing primarily gas.
Law firm Kirkland & Ellis LLP is handling the company's bankruptcy and Judge Marvin Isgur is overseeing the case.
Write to Soma Biswas at email@example.com