reserve-based lending

Oil & Gas Bankruptcy Issues: Part 5 Bankruptcy Issues for Secured Creditors

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Part 5: Bankruptcy Issues for Secured Creditors

In the final installment of this series on the oil & gas industry, Orrick Restructuring Chair Ron D’Aversa and Restructuring Partner Doug Mintz survey the bankruptcy landscape for the oil & gas industry in the current low-price climate, outlining strategic reasons for bankruptcies, how unencumbered assets make for an atypical bankruptcy case, and how valuation and new borrower options could ultimately lead to adversarial cases.

If you wish to skip ahead, select one of the below topics:

Where will the next bankruptcy filings occur?

How will financing play out in these bankruptcy cases and what are the important variables to consider?

What are some of the unique issues associated with sales in these cases?

What are the new options available to borrowers in these cases?

How will valuation, cramdowns and unencumbered collateral affect these cases?

For additional posts in this series, please click here: Part 1, Part 2, Part 3, Part 4.

Oil & Gas Bankruptcy Issues: Part 4 Liens in Bankruptcy Cases

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Part 4: Liens in Bankruptcy Cases

In this fourth of five videos on the oil & gas industry, Orrick Restructuring Chair Ron D’Aversa and Restructuring Partner Doug Mintz go over the often complicated process of securing liens for oil & gas operations, explaining what RBL liens typically attach to and how the liens compete with others invested parties.

If you wish to skip ahead, select one of the below topics:

What assets do RBL liens cover?

In addition to oil, what do liens typically attach to?

Would the lien still attach to the oil once it has been extracted?

How do liens that an RBL lender holds compete with other liens?

For additional posts in this series, please click here: Part 1, Part 2, Part 3, Part 5.

Oil & Gas Bankruptcy Issues: Part 3 Unique Structuring Issues

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Part 3: Unique Structuring Issues

In this third of five videos on the oil & gas industry, Orrick Restructuring Chair Ron D’Aversa and Restructuring Partner Doug Mintz explore the unique ways in which oil & gas interests are transferred, how these interests are treated in bankruptcy and offer clues as to what courts will look at when issues concerning carved-out interests arise.

If you wish to skip ahead, select one of the below topics:

How are oil & gas interests treated in bankruptcy cases?

How have courts weighed in on leases concerning oil & gas interests?

What are carved-out interests and how do they work?

How are carved-out interests treated in bankruptcy cases?

For additional posts in this series, please click here: Part 1, Part 2, Part 4, Part 5.

Oil & Gas Bankruptcy Issues: Part 2 Typical Deal Structures and Financings

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Part 2 Typical Deal Structures and Financings

In this second of five videos on the oil & gas industry, Orrick Restructuring Chair Ron D’Aversa and Restructuring Partner Doug Mintz discuss oil & gas deal structures and oil & gas financings.

If you wish to skip ahead, select one of the below topics:

What are the typical kinds of deals operators employ?

What is the typical deal structure for a reserve-based loan (RBL)?

How does the borrowing base work?

What is the process for redetermining borrowing bases?

What role do hedges play in the borrowing base redeterminations?

What is your view on how the spring redetermination process effected companies and what should we expect for the fall?

What happens if there is a major spike or decrease in price in the middle of the redetermination process?

For additional posts in this series, please click here: Part 1, Part 3, Part 4, Part 5.

A Battle in the Making in the Oil and Gas Sector: Second Lien vs. High Yield Debt

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In the oil and gas industry, there is a storm brewing between holders of second lien debt and unsecured high yield bonds.  These creditor groups are finding themselves pitted against one another as oil and gas companies become increasingly leveraged in an effort to alleviate liquidity constraints.

As widely publicized, oil prices precipitously decreased in 2014 and depressed prices have continued into 2015, with prices falling from $103 per barrel a year ago to around $60 per barrel today.  With this prolonged decline and period of weak oil prices, oil and gas companies are having difficulty breaking even.  Therefore, it is not surprising that many industry players, particularly the upstream division (comprised of exploration and production activities), have experienced tightened liquidity.  Larger and well-diversified companies are best equipped to weather the storm because they are able to rationalize liquidity by suspending new projects and future exploration, selling non-core/non-producing assets and demanding price reductions from service providers.  While these measures have helped ease some financial stress, they are often not enough and companies have turned to the debt capital markets as a source of liquidity.  These new financings provide companies with much needed time to either wait out this period of depressed oil prices or formulate a restructuring plan.

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