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Samson Still Hopes For Ch. 11 Deal Amid Creditor Divisions

22 February 2016

Oil and gas firm Samson Resources Corp. told a Delaware bankruptcy judge Monday that the company is hoping to file a Chapter 11 plan “in the very near term,” but despite months of negotiations, creditor constituencies remain far apart on several key issues.

During a hearing in Wilmington, Samson attorney Joshua Sussberg of Kirkland & Ellis LLP said that while the beleaguered company, which has been battered by volatility in energy commodity prices and lost its CEO in December, has reduced some administrative costs that gives it an “elongated runway” to try to leave Chapter 11, there are still important issues to be resolved before an exit strategy is ready for prime time.

Chief among the sticky issues is agreement on the equity value of the company, and consensus on whether Samson's debt can be restructured with a debt-for-equity swap or similar strategy that leaves it intact, Sussberg said.

Some creditors are practically “on opposite sides of the spectrum” when it comes to those questions, but Samson continues to believe that “a going concern strategy is absolutely viable” as a way to exit bankruptcy, the attorney added.

U.S. Bankruptcy Judge Christopher S. Sontchi did not react directly to the short presentation. He only noted that the debtor is trying to thrive in a challenging industry at the moment that he was pleased that it had found a replacement for former CEO Randy Limbacher.

The chief executive spot has been filled internally by Andrew C. Kidd, who will also continue as Samson's general counsel, debtor's attorney Brad Weiland of Kirkland & Ellis LLP told Judge Sontchi.

Samson filed for Chapter 11 protection in September, about six months after it suspended its drilling activities, and listed more than $4 billion in debt, including a $942 million first-lien revolving credit facility, $1 billion in second-lien term notes and more than $2 billion in senior unsecured notes. Much of the liabilities come from a 2011 leveraged buyout from the founding Schusterman family led by Kohlberg Kravis Roberts & Co. LP affiliates and investors Crestview Partners, Itochu Corp. and Natural Gas Partners, according to a first-day declaration from Chief Financial Officer Philip Cook.

Since the filing, the company has been pelted with bad news, not least of which is a more than 20 percent drop in the price of oil and a more than 30 percent drop in the price of natural gas since the petition, complicating an already difficult restructuring.

Samson had entered bankruptcy with a reorganization strategy in-hand that had the backing of many lenders, but that plan has since fizzled in the face of unrelenting energy commodity price volatility.

The company also announced it was struck by a $1.8 million hacking attack, and was able to recover at least $1.5 million of the money, but is not dealing with calls from creditors and the federal bankruptcy watchdog for a possible examiner to keep an eye on its funds.

The U.S. trustee's office has also been fielding requests to form a special landowners committee consisting of property owners, some of which claim they've been shorted royalties.

Samson did receive the green light Monday to sell more than 1,000 low-yield wells, many of which are slated to be retired, in a move said to cut the estate's expenses by about $6 million.

But Judge Sontchi excluded about two dozen of the wells from his approval so that landowners who objected could further negotiate with the company.

Samson is represented by James Sprayregen, Paul Basta, Edward Sassower, Ross Kwasteniet, Brad Weiland, Yosef Riemer and Joshua Sussberg of Kirkland & Ellis LLP, and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP.

The case is In re: Samson Resources Corp., case number 1:15-bk-11934, in the U.S. Bankruptcy Court for the District of Delaware.

Joshua A. Sussberg, P.C.