Page 9 - NorthAmOil Week 32

NorthAmOil PERFORMANCE NorthAmOil
Halcon, Sanchez file for bankruptcy protection
US
IT has been three years since the worst of the oil price downturn, which bottomed out in early 2016, but bankruptcies among shale drillers are continuing, albeit at a slower pace. Over the past week, both Halcon Resources and Sanchez Energy have separately filed for Chapter 11 bankruptcy protection. For Halcon, it is the sec- ond bankruptcy in three years.
Halcon announced that it was voluntarily l- ing for a pre-packaged bankruptcy on August 7, saying the reorganisation plan would eliminate $750mn of its debt and reduce its annual interest expenses by over $40mn. Unsecured notehold- ers will receive 91% of the reorganised company’s common stock.
e move came a er the company previously sought bankruptcy protection in May 2016, and emerged from it within two months. Halcon anticipates emerging from bankruptcy protec- tion within 60 days this time as well. It expects to have over $150mn in liquidity a er it emerges.
e bankruptcy ling comes a er the com- pany sought to rein in spending and drilling in an e ort to boost its performance. Such strat- egies have been common among shale drill- ers in recent months as they have come under shareholder pressure to prioritise returns over
growth. But as the latest bankruptcies illustrate, these moves have not been enough to keep all operators a oat.
Sanchez’s voluntary ling came on 11 August and followed “an extensive review of strategic alternatives to align its capital structure with the continued low-commodity-price environment”, the company said in a statement. e company, which was previously one of the most active drillers in the Eagle Ford shale, listed $2.1bn in assets and $2.8bn in debt in its ling. Sanchez said it would continue to operate as normal, having received an additional $175mn in newly committed financing. Of this, $25mn will be used to repay borrowings and replace a letter of credit (l/c).
Sanchez has not made an annual pro t since 2013, and posted a $9.7mn loss on $1bn of rev- enue in 2018.
Both Sanchez and Halcon were delisted from the New York Stock Exchange (NYSE) earlier this year.
According to data compiled by law firm Haynes and Boone, 172 North American pro- ducers led for bankruptcy protection between the start of 2015 and May 1, 2019. e companies had a combined $98.5bn in aggregate debt.™
PROJECTS & COMPANIES
Cuba prepares to battle ExxonMobil in US federal court
US-CUBA
CUBA’S government has indicated that it intends to contest a lawsuit led earlier this year by the US super-major ExxonMobil.
The government-owned entities targeted in the suit – Cupet, the national oil company (NOC), and Cimex, a retail fuel operator – intend to do battle with ExxonMobil, Cuba’s state television channel said last week. It stated that Cupet and Cimex had both “taken formal steps, through their lawyers, to defend themselves” in the US federal court system.
As of press time, neither company had con- rmed the report.
ExxonMobil launched the legal action against Cupet and Cimex in early May of this year. It did so shortly a er the administration of US Pres- ident Donald Trump took a new approach to enforcement of certain provisions of the legisla- tion underpinning sanctions on Cuba – namely, Title III of the Helms-Burton Law. This title states that parties who saw their assets seized a er Fidel Castro took power in 1959 have the right to le suit in the US federal court system
against Cuban individuals and businesses that pro ted as a result of the expropriation.
Trump’s act served to reverse a policy that has remained in place for more than 20 years. e Helms-Burton law took e ect in 1996, but Wash- ington has repeatedly declined to enforce Title III. It has adopted this path in the hope of avoid- ing criticism from allies such as the European Union, which has complained that the Cuban sanctions regime should not allow the US gov- ernment to apply penalties to non-US entities.
e policy shi gave ExxonMobil a green light to proceed with its suit against Cupet and Cimex. The US giant has alleged that the Cuban companies have been engaged in “unlawful tra cking” of its assets. One of the assets in question is an oil re nery that Stand- ard Oil, the company from which ExxonMobil emerged, built in Havana prior to 1959. Cuba’s government nationalised the plant in 1960 and assigned it to Cupet. Cimex distributes the re ned fuels that Cupet produces via its network of lling stations.™
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