Whiting Petroleum (NYSE:WLL) is the first casualty of the oil market crash. The oil company, which is a leading producer in North Dakota's Bakken shale, filed for Chapter 11 bankruptcy to restructure its debt.
Whiting has already reached an agreement in principle with certain holders of its senior notes due in 2021, 2023, and 2026, as well as its convertible senior notes due this year. The plan would:
- Reduce its debt by more than $2.2 billion through the exchange of its notes for 97% of new equity in the reorganized company.
- Fully repay its existing credit facility with cash and/or refinancing to a new facility.
- Fully repay all its other secured creditors as well as its employees.
- The company's existing shareholders would receive 3% of the equity in the newly recapitalized company as well as warrants.
The proposed restructuring agreement would substantially reduce Whiting's debt, which stood at $2.8 billion at the end of 2019, providing it with a more sustainable capital structure going forward. The company noted that it currently has more than $585 million in cash on its balance sheet, which will allow it to continue operating as normal during this period with no disruption to its vendors, partners, or employees.
Whiting had taken several steps in recent weeks to combat the plunge in oil prices following the COVID-19 outbreak and the collapse of Russia's oil market support agreement with OPEC. These included reducing its capital spending plan by 30% and fully drawing on its $650 million credit facility. However, with market conditions continuing to deteriorate, and note maturities looming, the company had no choice but to restructure its debt through bankruptcy.