Shored up by a comprehensive dispute settlement, oil and gas driller Samson Resources Corp. had its $4.2 billion Chapter 11 plan confirmed in Delaware bankruptcy court Monday, 17 months after seeking protection from creditors and saying it planned to shed three-quarters of its debt.
Under the settlement, the plan will pay the company’s first lien lenders their full $945.8 million in allowed claims, with $670 million delivered as cash and the balance provided as shares of new secured debt. The cash payout was conditioned on 100 percent acceptance of the settlement and full opt-in to the revolving loan that will provide exit financing.
Second lien lenders will receive substantially all of the reorganized company’s equity, including $60 million in new company shares.
“We think it’s the best and most value-maximizing alternative,” Samson attorney Brad Weiland of Kirkland & Ellis LLP said. “The reorganized debtors remain in business after accounting for asset sales, and deliver the maximum recoveries to all creditors of interest.”
Unsecured creditors will receive between $168.5 million and $180 million, depending on the timing of the settlement, or 7 to 7.5 percent of their more than $2.4 billion stake in the business. The settlement will be funded from asset sales and proceeds from a second lien lenders' new money rights offering.
The plan approval leaves for another day the sorting out of more than $80 billion in asserted royalty claims by landowners who leased oil and gas rights to Samson interests over the years.
Heirs to one family alone asserted about $2 billion in claims, although the company said it believes that it pulled only a fraction of that amount of hydrocarbons from the ground since January of 2014.
U.S. Bankruptcy Judge Christopher S. Sontchi said the decision on the Chapter 11 plan’s feasibility and its confirmation would not affect the subsequent claim disputes or decisions on their merits.
“They [Samson] need to prove to me that it’s more likely than not that they don’t owe $80 billion,” Judge Sontchi said.
J. Christopher Shore of White & Case LLP said that the new owners, bankruptcy estate and settlement trustee would have to work through the claims to reach a hoped-for final effective date of June 30. He said, however, that the committee views the royalty totals as significantly overstated.
“Had the debtor had $85 billion in revenues, even I would have had a difficult time finding something to fight about,” Shore said, noting separately that arrival at the fully agreed-upon plan “did not seem possible on the first day of these cases.”
Samson became one of the larger energy producers to seek protection from creditors in U.S. bankruptcy courts in the wake of the oil and natural gas price slump of recent years. The company operates or has royalty or working interests in about 8,700 oil and gas wells.
During the course of the bankruptcy, Samson auctioned off hundreds of oil and gas wells across its 12-state business, which stretches from Texas to the Dakotas, netting the business about $660 million.
“This is my favorite kind of confirmation hearing, which is anticlimactic after a tremendous amount of work,” Judge Sontchi said, recalling months of dispute negotiation, broken-off mediation and “ultimately successful mediation.”
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.
Exxon Mobil Corp. is represented by Gregory W. Hauswirth of Leech Tishman Fuscaldo & Lampl LLC, and J. Robert Forshey of Forshey & Prostok LLP.
The official unsecured creditors committee is represented by Joseph J. Farnan Jr., Joseph J. Farnan III and Michael J. Farnan of Farnan LLP, and Thomas E. Lauria, Glenn M. Kurtz, J. Christopher Shore, Michele J. Meises and Thomas MacWright of White & Case 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.
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