EV Energy Partners LP filed for Chapter 11 bankruptcy Monday to implement a prepackaged restructuring support agreement it reached with a majority of its senior lenders to swap old debt for new equity and prune its funded debts by more than $343 million.
The Houston-based oil and gas producer, which operates as a master limited partnership, said it has received resounding support from voting creditors to carry out a plan of reorganization that would hand more than 95 percent of the company to senior noteholders and the rest to existing unitholders in exchange for reducing more than half of its $640 million in funded debt. The deal incorporates modifications to its $325 million reserve-based lending facility.
EV Energy announced that it would be filing for Chapter 11 protection last month in light of entering into the restructuring agreement with its major stakeholders, which contemplates full compensation for suppliers, customers and other holders of general unsecured claims.
“We believe that this provides the best path forward for our company to reduce leverage, maintain access to liquidity and maximize value for all of our stakeholders,” CEO Michael Mercer said in a statement last month. “During the restructuring and upon emergence, we expect to have ample liquidity and do not anticipate the need for debtor-in-possession financing or other additional capital.”
EV Energy is a publicly-held partnership formed in 2006 with affiliate ties to EnerVest Ltd. The company owns oil and natural gas properties in the Barnett Shale, the San Juan Basin, the Appalachian Basin, Michigan, Central Texas and other areas in Oklahoma, Texas, Arkansas, Kansas and Louisiana.
In a U.S. Securities and Exchange filing released Monday, EV Energy said it has been affected by precipitous declines in oil prices during 2015 and 2016. Though prices began to increase last year, they did not reach a point for the company’s revenues and cash flows to meet a longer term level required in its credit agreement.
In addition to negotiating a debt reduction agreement with its creditors, EV Energy said it has taken steps to preserve liquidity by reducing its operating costs, increasing capital spending to maintain levels of production, evaluating strategic acquisitions and searching for alternative sources of capital.
The restructuring agreement has received nearly unanimous support since it was floated to EV Energy’s noteholders and lenders last month, the company said Monday, as it announced the bankruptcy filing. According to the debtors, employee wages and benefits will continue without interruption in the ordinary course of business, while suppliers and vendors will receive payments in the normal course.
EV Energy seeks to confirm its proposed restructuring plan by May 15.
The debtors are represented by Laura Davis Jones of Pachulski Stang Ziehl & Jones LLP and by Joshua A. Sussberg, Jeremy Evans, James H.M. Sprayregen, Brad Weiland and Travis M. Bayer of Kirkland & Ellis LLP.
The case is In re: EV Energy Partners LP et al., case number 18-10814, in the U.S. Bankruptcy Court for the District of Delaware.
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