NewsOK: Oklahoma City News, Sports, Weather & Entertainment

Another STACK operator files for bankruptcy after difficulties

A rig drills a well near Kingfisher in the STACK play of the Anadarko Basin in 2018. [THE OKLAHOMAN ARCHIVES]
A rig drills a well near Kingfisher in the STACK play of the Anadarko Basin in 2018. [THE OKLAHOMAN ARCHIVES]

TULSA — Privately owned Chisholm Oil and Gas Operating is seeking Chapter 11 bankruptcy protection as it aims to shed $517 million in debt, court filings show.

The company, founded in 2017 to acquire, develop and produce oil and natural gas assets in the Anadarko Basin in Oklahoma, fell on hard times after disappointing well results and couldn’t recover before this year’s energy market collapse.

A filing in the case by Matthew J. Henry, a managing director with the global restructuring advisory firm Alvarez & Marsal North America, stated his company was hired by Chisholm in early March to explore its options.

Henry stated in an affidavit that Chisholm was founded by Robert Zinke, a successful oil and gas prospector with 43 years of experience, and Apollo Global Management, a firm he had worked with to identify oil and gas investment opportunities.

Ultimately, they identified and acquired about 53,000 acres located in the STACK play near Kingfisher that was owned by Staghorn Petroleum, another private operator in the play.

After that, Chisholm grew its assets in the play by acquiring others, including those previously owned by Gastar Exploration, another private operator who also recently went through a bankruptcy process.

Operations detailed

Henry’s affidavit stated Chisholm primarily drills horizontal wells that seek to produce oil and natural gas from formations inside the STACK play, earning revenues from the sale of those commodities from its wells.

At the time the company filed for bankruptcy, it held about 152,000 contiguous acres of oil and gas interests concentrated in Kingfisher County, and employed 32 people, not including independent contractors.

The company maintains operational control over about 90% of its reserves and contracts with various third parties to operate the remainder.

When the company filed its petition on June 18, it was operating 80% of its wells. However, the company isn’t currently engaged in any drilling activities, Henry’s affidavit stated.

The company also owns saltwater disposal assets owned by a subsidiary, Cottonmouth SWD.

It also, through Chisholm Midstream, owns 35% equity in Great Salt Plains Midstream Holdings, which provides Chisholm with gathering, transportation and processing for its produced oil and natural gas to bring the commodities to market.

Great Salt Plains isn’t a party to the bankruptcy cases, Henry’s affidavit stated.

Bankruptcy causes

Henry’s affidavit stated Chisholm began to encounter financial difficulties last year after certain wells it had drilled and completed failed to perform as expected.

After repeatedly missing engineers’ projections, Chisholm replaced that team and rewrote its financial and drilling plans.

While subsequent wells performed better, dropping commodity prices prevented it from fully implementing its plans.

Changing market conditions also prevented the company from obtaining additional needed capital, forcing it to shutter its drilling program.

The company obtained Henry’s firm earlier this year to help it analyze the best way to move forward, just as a war for global market shares of crude oil between Saudi Arabia and Russia commenced and as the economic shutdown caused by COVID-19 caused commodity prices to collapse.

“The unprecedented reduction in oil prices further disrupted Chisholm’s recapitalization efforts. Chisholm was forced to suspend its extraction operations and conduct multiple reductions-in-force to preserve liquidity,” Henry’s filing stated.

The company, with the help of Henry’s firm, also entered into extensive negotiations with its financial backers to obtain their support for its reorganization plans.

A resulting restructuring agreement agreed to by nearly 100% of those backers, Henry stated, will allow the company to emerge capable of continuing as a going concern.

“The restructuring transaction offers the company the opportunity to take advantage of an approximately three-month Chapter 11 process to implement a restructuring that addresses its near-term liquidity and strengthens its balance sheet through a significant de-leveraging, while allowing operations to go forward on an ordinary-course-basis.

“This will enable the company to maximize the value of its assets for all stakeholders and emerge from these Chapter 11 Cases positioned for growth and success,” Henry stated.

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›