LNG

McDermott International, the LNG and energy engineering company, has finalized $560 million in new capital through a series of transactions just a year after filing for Chapter 11 bankruptcy protection.

McDermott International, the LNG and energy engineering company, has secured around $560 million in new capital through a series of transactions expected to close by the end of 2020, just a year after filing for Chapter 11 bankruptcy protection.

McDermott has secured commitments from certain existing lenders and shareholders for these transactions, as well as approval from a steering committee comprised of certain existing letter of credit and term loan lenders.

“The transactions are designed to further strengthen the company's balance sheet, increase liquidity and fund future growth opportunities,” said McDermott.

The Houston, Texas-based company said the support reflected their confidence in the long-term business strategy and competitive position.

Analysts noted that many companies in the US and global oil and gas sector have experienced difficulties in the past year, though McDermott's problems were essentially caused by an ill-timed take-over deal.

McDermott is involved in some of the world’s leading LNG construction projects, including on the US Gulf Coast and the North Field Expansion in Qatar and at Ichthys LNG in Australia.

McDermott has additionally been engaged as a contractor on the Golden Pass LNG export project for Qatar Petroleum and ExxonMobil.

“Following on the heels of a successful restructuring earlier this year, this additional capital will further solidify our liquidity position, enabling us to continue to deliver superior project execution for our customers and consistently pursue new growth opportunities as demand for our expertise and capabilities increases,” said
David Dickson, President and Chief Executive of McDermott.

Kirkland and Ellis LLP is serving as legal counsel to McDermott, AP Services, LLC, an affiliate of AlixPartners, is serving as operational advisor and Centerview Partners is serving as the company's financial advisor.

McDermott first received approval for a comprehensive restructuring plan in January 2020, supported by more than two-thirds of all its funded debt creditors.

The equity-for-debt plan eliminated more than $4.6 billion of McDermott’s debt.

The restructuring was implemented through a pre-packaged Chapter 11 process.

The process resulted in a comprehensive balance sheet restructuring and transformed into equity nearly all of McDermott's funded debt.

The company had suffered financial problems since it completed the $6Bln deal in 2018 to buy LNG rival engineering, procurement and construction company Chicago Bridge & Iron (CB&I).

The restructuring transaction managed to strengthen its balance sheet and normalize its trade debt.

All of McDermott's businesses operated as normal during the restructuring.

McDermott also completed the sale of Lummus Technology to a joint partnership between Haldia Petrochemicals, a flagship company of The Chatterjee Group, and equity fund Rhone Capital, having received all required regulatory approvals under the reorganization.

McDermott emerged from the crisis with a newly constituted board of directors.

Gulfport Energy Corp, a US natural gas exploration and production company with significant acreage in the Utica Shale of eastern Ohio and the Woodford and Springer Scoop plays in Oklahoma, has become the latest US energy operator to file for Chapter 11 bankruptcy protection.

As part of a restructuring plan, Gulfport said it expected to eliminate about $1.25 billion in funded debt and significantly reduce annual cash interest expenses.

Gulfport, whose headquarters are in Oklahoma City, said it had filed petitions for Chapter 11 relief under of the US Bankruptcy Code in the Court for the Southern District of Texas.

Weak demand due to the Covid-19 pandemic and the oil price plunge and economic slowdowns have depressed the liquidity and values of energy company assets around the world.

Gulfport said it intended to use the proceedings to strengthen its balance sheet, restructure certain debt obligations, significantly reduce its midstream cost structure and achieve a more sustainable capital structure.

The company stated that it intended to continue to operate in the ordinary course of business during the restructuring process.

As a result of the current commodity price environment, Gulfport was one of many companies that said earlier in 2020 that had made a strategic decision to defer near-term production to later periods in 2020 and early 2021 when natural gas prices were expected to be higher.

The Utica Shale is located in the Appalachian Basin of the US and is located a few thousand feet below the Marcellus Shale.

Natural gas output in the Utica Shale accounted for 77 percent of Gulfport’s total net quarterly production.

The company said its proved reserves in the Utica amounted to 3.2 trillion feet equivalent net. Its activities are focused on 205,000 net acres within the core of the dry gas, wet gas and condensate windows of Utica’s Point Pleasant formation.

In a statement, Gulfport said it has secured $262.5 million in debtor-in-possession financing from its existing lenders under its revolving credit facility, including $105M in new money that will be available upon court approval.

Gulfport is also present in the South Central Oklahoma Oil Province (Scoop) play of Oklahoma, which is located in the southeast portion of the prolific Anadarko Basin.

The company has 1.3 Tcf equivalent of net proved reserves and 76,000 net reservoir acres.

David M. Wood, President and Chief Executive of Gulfport, explained that since the leadership team was reconstituted in 2019, it had taken decisive actions to streamline the business and strengthen the balance sheet.

“Despite these efforts, our large legacy debt burden in addition to significant legacy firm transportation commitments created a balance sheet and cost structure that was unsustainable in the current market environment,” stated Wood.

“After working diligently to explore all strategic and financial options available, Gulfport’s Board of Directors determined that commencing a Chapter 11 process is in the best interest of the company and its stakeholders,” he added.