Fieldwood announces prepackaged Chapter 11 with restructure plan that depends on acquiring Noble’s GOM assets; expects to emerge in 60 days
Noble Energy, Inc. (ticker: NBL) said it has executed an agreement to sell its deepwater Gulf of Mexico assets to Fieldwood Energy LLC for a total value of $710 million.
As Noble announced the deal, Fieldwood simultaneously announced that it filed a prepackaged Chapter 11 bankruptcy and restructuring plan that is dependent on acquiring “significant revenue-producing assets,” meaning Noble’s GOM assets. The effective date of the GOM asset purchase transaction with Noble is January 1, 2018, with closing anticipated during the second quarter 2018, Noble said.
The closing is contingent upon Fieldwood successfully implementing its contemplated restructuring process, Noble said in a press release.
Fieldwood, a portfolio company of Riverstone Holdings, reports being the largest operator in the Gulf, with an interest in approximately 500 leases covering more than 2 million gross acres with 1,000 wells.
Fieldwood’s RSA
In conjunction with the Chapter 11 filing, Fieldwood reported it had entered into a Restructuring Support Agreement (RSA) with support from stakeholders representing, in principal amount, approximately 75% of its first lien term loans, 72% of its first lien last-out term loan, 77% of its second lien term loan, and Riverstone, as the holder of 100% of its sponsor second lien term loan as well as the company’s private equity sponsor.
“Specifically, the proposed restructuring contemplates (a) reducing current debt by approximately $1.6 billion, (b) raising capital of approximately $525 million through an equity rights offering (the “Rights Offering”), and (c) acquiring all deepwater oil and gas assets of Noble Energy, Inc. located in the Gulf of Mexico,” Fieldwood said.
Fieldwood said it will use the proceeds of the rights offering to fund the acquisition, fund the costs and expenses of the Chapter 11 cases, and for general working capital after emergence from Chapter 11. The Plan also provides that holders of undisputed general unsecured claims will be paid cash in full.
Fieldwood’s Chief Executive Officer Matt McCarroll said that the developments are “the result of extensive negotiations with our lenders and Riverstone as well as Noble Energy, Inc. “
McCarroll called it “a unique plan of reorganization” and he said he expects the plan to allow the company to emerge from Chapter 11 within the next 60 days.
“Our goal going into this process was to fix our leverage and liquidity issues while continuing to honor our commitments to all of our business partners, vendors, and employees as well as all of the government agencies that touch our business. I believe that we have accomplished that goal with this plan.”
Fieldwood said it had obtained a $60 million debtor-in-possession financing facility which is available, if necessary, to ensure that the company has adequate funds to operate the business during the restructuring process. Fieldwood also filed First Day Motions seeking approval to continue paying in full, all operating expenses, joint interest billings, royalties, insurance and surety bond costs, employee related expenses, and taxes, among other things.
“We fully expect that our operations will continue in the normal course and that we will continue to be able to meet all of our business obligations to third parties as well as the government throughout this process,” McCarroll said.
Fieldwood’s Chapter 11 case is being heard in the United States Bankruptcy Court for the Southern District of Texas.
Noble/Fieldwood GOM deal terms
Noble reported that cash proceeds included in the transaction total $480 million, and Fieldwood will assume all abandonment obligations associated with the properties, which Noble recorded at a book value of approximately $230 million as of December 31, 2017.
Noble said the deal includes a cumulative contingent payment of up to $100 million payable to Noble Energy from closing of the transaction through the end of 2022, determined quarterly at a rate of $2 per barrel produced–when the average Light Louisiana Sweet oil price exceeds $63 per barrel.
Noble’s Gulf divestment includes 20 MBOEPD of net production
Included in the transaction is Noble’s interest in six producing fields and all undeveloped leases. Noble Energy estimates net production from these assets for 2018 to average slightly more than 20 thousand barrels of oil equivalent per day for the year. Total proved reserves in the Gulf of Mexico as of year-end 2017 for Noble were 23 million barrels of oil equivalent.
Noble Energy’s Chairman, President and CEO David L. Stover said in a statement, “The sale of our Gulf of Mexico business represents the last major step in our portfolio transformation … to focus our go-forward efforts on those assets that will rapidly grow our cash flows and margins, primarily the U.S. onshore business and the Eastern Mediterranean.” Stover said the company intends to focus exploration efforts on higher impact opportunities.
Noble’s GOM assets
Noble says on its website that three recent projects in the Middle Miocene system of the deepwater Gulf of Mexico almost doubled its production in 2016 compared to a year earlier: Big Bend and Dantzler began producing in late 2015, and Gunflint came on line in mid-2016.
Noble said it moved into deepwater U.S. Gulf of Mexico 20 years ago, “making our first deepwater discovery there in 2001 followed by first production in 2005. Between 2006 and 2014, we made nine deepwater Gulf of Mexico discoveries.”
Noble said it operates two deepwater production platforms offshore the Gulf of Mexico: Thunder Hawk and the Neptune Spar.
Noble said production in the U.S. Gulf of Mexico is currently about 85 percent oil and 10 percent natural gas, with the remainder natural gas liquids.
Fieldwood’s history in the Gulf started in 2013
Fieldwood got into the Gulf when it acquired Apache’s Gulf of Mexico Shelf business in 2013, followed by the acquisition of SandRidge’s Gulf of Mexico and Gulf Coast business units in early 2014. Fieldwood subsequently completed several smaller and bolt-on transactions.
Noble announces share buyback
Noble also reported today that its board of directors had authorized a $750 million share repurchase program during the period of 2018 through 2020. At today’s share price, the program covers approximately six percent of Noble’s outstanding shares, Noble reported in a press release.
