Gulfport Energy announced on November 14 that it filed for voluntary relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. Shares of the energy company have fallen 92% in 2020.
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In conjunction with the bankruptcy filing, Gulfport (GPOR) has entered into a Restructuring Support Agreement (RSA) with over 95% of its revolving credit facility lenders and certain noteholders holding over two-thirds of the outstanding aggregate principal amount of its senior unsecured notes. Along with the RSA, the company revealed its restructuring plan designed to strengthen the balance sheet, significantly reduce its funded debt and trim ongoing operational costs.
As per the restructuring plan’s terms, the company will see roughly $1.25 billion in funded debt erased,
and will significantly reduce the annual cash interest expense moving forward. Gulfport also expects to issue $550 million of new senior unsecured notes to existing unsecured creditors of certain Gulfport subsidiaries.
Under its revolving credit facility, Gulfport has secured $262.5 million in debtor-in-possession financing from existing lenders, which includes $105 million that will be available upon court approval. It has also received a commitment from existing lenders to provide $580 million in exit financing when it emerges from the chapter 11 proceedings.
Gulfport’s President and CEO David Wood said, “Since Gulfport’s leadership team was reconstituted in 2019, we have taken decisive actions to streamline our business, strengthen our balance sheet, focus on cash flow generation, exercise capital discipline, and drive operational efficiencies and cost reductions across the Company. Despite these efforts, our large legacy debt burden in addition to significant legacy firm transportation commitments created a balance sheet and cost structure that was unsustainable in the current market environment.”
“We expect to exit the chapter 11 process with leverage below two times and rapidly delever thereafter due to a much-improved cost structure driven by reduced legacy firm transport commitments and costs,” Wood added.
Gulfport has struggled to survive, with a slew of acquisitions over the past 10 years leaving it cash strapped. After activist investor Firefly Value Partners pressured the company to change its board, the company stated in August that it might not be able to stay afloat if it didn’t refinance its debt.
Currently, Wall Street has been quiet on the stock, but this may change given this recent development. (See Gulfport stock analysis on TipRanks)
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