Cerberus, GSO, Centerbridge eye Samson Resources

While a July 1 deadline looms for a critical interest payment on its second-lien term loan debt, Samson Resources remains in talks with creditors about a possible Chapter 11 restructuring. KKR may end up exiting Samson Resources under some scenarios. The firm acquired the oil and gas producer in a 2011 leveraged buyout, according to reports.

Blackstone Group’s credit shop, GSO Capital, and Centerbridge Partners are among junior bondholders that reportedly offered to exchange notes at a discount for higher-ranking debt in a move that could hold off Chapter 11, according to a report.

Cerberus Capital, a lender to Samson, offered to take an ownership position in exchange for debt in a Chapter 11 process that could result in the end of KKR’s ownership, according to a report.

A KKR spokesman declined to comment. Cerberus Capital and Blackstone spokesmen declined to comment. Centerbridge did not reply to an email.

Samson CEO Randy Limbacher said on May 20 that the company is working with its strategic advisers on its balance sheet restructuring. “We are not prepared to discuss the details of this process,” he said.

Excluding $206.9 million in cumulative preferred stock, Samson Resources held $947 million in RBL Revolver debt as of March 31. It also is on the hook for $2.25 billion in senior notes and a $1 billion second-lien term loan.

On July 1, Samson faces a requirement for minimum liquidity of $150 million, according to a filing. Samson is supposed to make $110 million in interest payments on its senior notes twice a year (on Feb. 15 and Aug. 15), and $12.5 million in interest on its second-lien term loan at the end of each fiscal quarter, plus monthly interest payments on its ABL revolver, according to a filing.

Samson Resources booked $20 million in cash flow from operations in the first quarter, down from $103 million in the year-ago period. It also reported $61 million in divestitures during the quarter. Adjusted EBITDA fell to $92 million from $179 million. The company ended the quarter with $125 million in cash.

Looking forward

On the plus side, oil prices have stabilized of late and private equity firms and institutional investors are looking to put money to work in the energy sector, as shown by strong fundraising for private equity funds focused on oil and gas.

Samson said it has identified the East Texas and Bakken region of North Dakota as platform assets “from which to build the company when commodity prices improve and stabilize.”

For 2015, the company said it remains focused on cutting costs and improving operational efficiency. Samson took a one-time restructuring charge of $35 million for a total workforce reduction of 35 percent. It employed 997 employees as of Dec. 31, according to filing.

Standard & Poor’s Rating Service on April 1 cut its corporate credit rating on Samson to CCC- from CCC with a negative outlook to reflect the expectation it may not be able to meet its obligations. The CCC rating means the company is vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments, according to S&P definitions.

In the event of a default, S&P estimates a net enterprise value of about $1.45 billion for Samson, after 7 percent administrative costs.

While Samson and other oil companies struggle to re-tool in a world of lower oil prices, generalist private equity firms that have never invested in energy continue to wade into the sector at a time of lower valuations. Some in the oil patch describe these firms as “energy tourists.”

Thomson Reuters tracked 40 oil and gas companies selling $18.7 billion in new public equities in 2015, the highest level in at least 15 years. Also, 35 companies issued $26.4 billion in debt as of May 1, on track to be the largest dollar figure in three years. Meanwhile, private equity firms have raised about $35 billion in funds focused on U.S. energy in the past six months.

Some remain wary that oil prices may not continue to rise after a roughly 34 percent increase in U.S. crude prices since March to about $60 a barrel now.