Oasis Petroleum (NYSE:OAS) announced today that it has filed for Chapter 11 bankruptcy. The oil company has entered into a restructuring support agreement with the majority of its creditors on a comprehensive "pre-packaged" restructuring plan. This agreement will enable the company to significantly reduce its debt and strengthen its balance sheet.
Oasis Petroleum's bankruptcy filing doesn't include its MLP Oasis Midstream Partners (NASDAQ:OMP). The company noted that the midstream entity remains well capitalized and would continue to operate normally. Furthermore, it should continue benefiting from its fee-based contracts with Oasis and other producers.
Overall, Oasis expects the financial restructuring to reduce its total debt by $1.8 billion, which includes all its senior unsecured notes and senior unsecured convertible notes. After reemerging from bankruptcy, the company expects to have $340 million of borrowings under its credit facility. The oil producer anticipates completing this restructuring on an accelerated time frame that has it on track to emerge from bankruptcy as soon as November, following court approval.
Oasis' envisioned quick trip through the bankruptcy process by implementing a pre-packaged plan would follow a similar pattern of other oil companies that filed earlier this year. For example, Denbury filed for bankruptcy in late July and completed its process earlier this month. Meanwhile, Whiting Petroleum filed in April and then emerged on Sept. 1.
Like Denbury and Whiting, the main driver of Oasis' needing to restructure via bankruptcy was the crushing blow of volatility in the oil market earlier this year from the pandemic's effect on demand. That led the company and its creditors to seek solutions to reduce its debt and increase its long-term financial flexibility. By implementing this pre-packaged plan, the company can quickly emerge much stronger financially.