INDUSTRY BRIEFS

WPX Energy sells Piceance subsidiary for $910M

WPX Energy has signed an agreement to sell its wholly owned subsidiary WPX Energy Rocky Mountain LLC to Terra Energy Partners LLC for $910 million. The parties expect to close the sale in the second quarter. Additionally, Terra is assuming approximately $100 million in transportation obligations in exchange for more than $90 million of WPX's natural gas hedge value. WPX will retain more than $110 million in additional hedge gains, which will be realized throughout the year. The divested assets consist of an approximate 200,000-net-acre position in the Piceance Basin of Colorado boasting recent net production of approximately 500 million cubic feet equivalent per day. The assets also include deep rights across approximately 150,000 net acres prospective for the emerging horizontal Mancos-Niobrara play. Credit Suisse acted as the exclusive financial advisor to WPX on the Piceance transaction.

Gastar sells certain Appalachian Basin assets

Gastar Exploration Inc. has agreed to sell Appalachian Basin assets primarily located in Marshall and Wetzel counties, West Virginia. The PSA is with an affiliate of Tug Hill Inc. for the sale of certain of Gaster's Marcellus and Utica/Point Pleasant properties for $80 million. The sale includes all of Gastar's producing assets and proved reserves and a portion of its undeveloped acreage in the Appalachian Basin. The sale is expected to close on or before March 31, with an effective date of Jan. 1. Proceeds will be used to reduce borrowings under Gastar's revolving credit facility. Tudor, Pickering, Holt & Co. served as financial advisor to Gastar. Following the announcement, Seaport Global Securities analysts commented: "Assuming the deal closes, GST will have ~$115MM cash and $190MM drawn on its $200MM revolver; thus, if we assume the revolver is cut 50%, GST still has breathing room. Furthermore, we expect management to accelerate the process to divest a portion of its 110K net Mid-Con acres, which could be a meaningful deleveraging event without giving up too much acreage upside. Net/net, liquidity is currently stretched, but we think GST's asset value still far exceeds its enterprise value."

Marathon Petroleum quarterly earnings down nearly 80%

In its 2015 fourth-quarter report, Marathon Petroleum Corp. stated that its quarterly earnings fell by nearly 80% from 2014, but that the company still realized a net income gain for full-year 2015. The refining and pipeline company reported quarterly earnings of $187 million, or $0.35 per diluted share, compared with $798 million, or $1.43 per diluted share, in the fourth quarter of 2014. Fourth-quarter 2015 earnings include a pretax charge of $370 million, or $0.44 per diluted share, to value inventories at lower of cost or market (LCM). The results of the completed combination between MPLX and MarkWest are included from the Dec. 4, 2015, merger date. MPX's earnings were $2.85 billion, or $5.26 per diluted share, for the full-year 2015, compared with $2.52 billion, or $4.39 per diluted share, in 2014. The company reported a $168 million net income gain for the final three months of the year, down from $805 million. For the year, MPX's net income increased to $2.87 billion from $2.55 billion. The company plans to lower its 2016 CAPEX from $4.2 billion to $3.7 billion.

Schlumberger-Cameron merger gets green light from European Commission

Schlumberger Ltd. and Cameron International Corp. received unconditional approval from the European Commission to proceed with their proposed merger following a Phase 1 review. The US Department of Justice cleared the proposed merger in November 2015 without any conditions; Cameron stockholders voted on December 17 to adopt the merger agreement between Schlumberger and Cameron; and antitrust clearances have been obtained in Canada, Brazil, Russia, and Mexico. Under the terms of the merger agreement, Schlumberger and Cameron only await regulatory approval from the Ministry of Commerce of the Peoples' Republic of China. The Chinese authorities started their 30-day Phase 1 review process on February 4, 2016. The closing of the proposed merger remains subject to the satisfaction or waiver of the remaining customary closing conditions contained in the merger agreement. Schlumberger and Cameron expect to close the merger in the first quarter of 2016.

Anadarko cuts dividend 81%

The board of directors of Anadarko Petroleum Corp. declared, on Feb. 9, a quarterly cash dividend on the company's common stock of 5 cents per share, payable March 23, to stockholders of record at the close of business on March 9. The quarterly dividend represents a 22-cent reduction from the prior level of 27 cents per share - or an 81% reduction. In a statement, Anadarko chairman, president and CEO Al Walker said the action "provides approximately $450 million of additional cash available to enhance our operations and financial flexibility," and noted that the board evaluate the dividend on a quarterly basis.

Standard & Poor's downgrades Chesapeake

Standard & Poor's Ratings Services lowered its corporate credit rating on Oklahoma City-based oil and gas exploration and production company Chesapeake Energy Corp. to 'CCC' from 'CCC+' as the company faces heavy debt maturities over the next 24 months. S&P also lowered its senior secured and recovery ratings on Chesapeake's second-lien debt to 'CCC+' and '2' respectively, and removed the rating from CreditWatch with negative implications. The issue-level rating on Chesapeake's first-lien debt was lowered to 'B-' from 'B', and senior unsecured rating to 'CC' from 'CCC-. "The downgrade reflects the potential that Chesapeake could pursue a further debt exchange over the next 12 months and that we would view a transaction as distressed rather than opportunistic, and which we would consider a selective default," said Standard & Poor's credit analyst Paul Harvey. "This follows the announcement that Chesapeake is working with Kirkland & Ellis LLP to improve its balance sheet and likely to help address upcoming maturities," he added. Seaport Global Securities updated its estimates on the company to adjust for its Q4 MVC shortfall, and to reflect January suspension of preferred dividend. The analysts Q4:15 EPS/CFPS/EBITDA estimates for Chesapeake move to ($0.23)/$0.37/$325MM from ($0.17)/$0.52/$473MM previously. In a statement Jan. 22, Chesapeake CEO Doug Lawler said the decision to suspend preferred stock dividends will allow the company to retain approximately $170 million of additional cash per year that would be used to purchase debt at discounts in the near term.

Shell cancels bridge credit facility

Royal Dutch Shell plc has canceled its commitments under a bridge credit facility in full, effective Feb. 10, as the company is in a position to fund the full amount of the cash consideration due on completion of its combination with BG Group plc from Shell's cash resources. On May 1, 2015, Shell entered into the £10,070,000,000 bridge credit facility agreement with a group of relationship banks in connection with the recommended cash and share offer made by Shell for the entire issued, and to be issued, share capital of BG Group.

LINN Energy explores options

LINN Energy LLC has initiated a process to explore strategic alternatives, including filing for bankruptcy, in order to strengthen its balance sheet and maximize the company's value. LINN has retained Lazard as its financial advisor and Kirkland & Ellis LLP as its legal advisor to assist the board of directors and management team with the strategic review process. Baker Botts LLP will continue to provide ongoing corporate and finance representation. The company recently borrowed approximately $919 million from LINN's credit facility, which represented the remaining undrawn amount that was available under the credit facility. These funds are intended to be used for general corporate purposes. Total borrowings under the credit facility are now $3.6 billion. Berry Petroleum Company LLC's credit facility remains fully utilized at $900 million, including $250 million of restricted cash posted as collateral.

Paragon begins bankruptcy proceedings

Paragon Offshore plc and certain of its subsidiaries have elected to begin proceedings under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court in the District of Delaware. As announced on Feb. 12, Paragon entered into a plan support agreement (PSA) to support a restructuring of Paragon's balance sheet. As of Feb. 15, the PSA has been signed by an ad hoc committee representing 77% in the aggregate of holders of its senior unsecured notes and a group comprising 96% of the amounts outstanding under Paragon's senior secured revolving credit agreement. An additional member of the revolving credit agreement group signed the PSA subsequent to the Feb. 12 announcement. Approval of the transaction by the revolver lenders and the bondholders will require that 2/3 in principal amount and 1/2 in number of those voting in each class to approve the transaction. The company also announced that it has filed certain first-day motions with the court to facilitate operating in the normal course throughout the Chapter 11 process. Weil, Gotshal & Manges LLP is serving as legal counsel to Paragon, and Lazard is serving as financial advisor.

Helix amends credit facility

International offshore energy services company Helix Energy Solutions Group Inc. has amended its credit agreement. The amendment included increasing the trailing four quarter maximum leverage ratio to 5.5x for the quarter ending March 31, then decreasing gradually over successive quarters to 3.5x by Dec. 31, 2017; decreasing the trailing four quarter minimum interest coverage ratio to 2.5x for the quarter ending March 31, then increasing to 3.0x by June 30, 2017; reducing the credit facility revolver commitment from $600 million to $400 million, which will save the company $1 million annually in commitment fees; and adding a cash requirement covenant of $50 million if our leverage ratio exceeds 3.5x, $100 million if it exceeds 4.0x and $150 million if it exceeds 4.5x.

IHS closes OPIS acquisition

IHS Inc., a global source of information and insight, has completed its acquisition of Oil Price Information Service (OPIS), an internationally referenced pricing reporting agency that serves the oil, natural gas and biofuels industries. OPIS provides US refined petroleum pricing data, news, and analytics. OPIS information primarily serves the downstream energy market. OPIS will remain headquartered in Gaithersburg, Maryland. The company was previously owned by UCG, a privately held portfolio of business information, software and technology companies. OPIS was represented by Centerview Partners.

SandRidge elects to exercise grace period, defers $21.7M in interest payments

SandRidge Energy Inc. elected to exercise its grace period and defer making approximately $21.7 million in interest payments due Feb. 16, on its outstanding $543.6 million principal amount of 7.5% senior notes due 2023 and its outstanding $46.9 million principal amount of 7.5% senior convertible notes due 2023. At the time of the announcement (February 17), the company said it had "sufficient liquidity" to make the payments, but chose to use its 30-day grace period "in connection with its ongoing discussions with stakeholders." In January, the company hired Kirkland &Ellis LLP as legal adviser and Houlihan Lokey Inc. as financial adviser to help analyze strategic alternatives for the company.