Energy XXI (EXXI +5.4%) is higher after saying it has hired investment bankers at Morgan Stanley to assist with developing a strategic plan, including a stand-alone financial plan and selected strategic alternatives.
EXXI's move to retain financial advisors follows the completion a financial restructuring process and re-listing its stock on Nasdaq.
EXXI also says it continues to search for a permanent CEO following last month's appointment of Michael Reddin as interim CEO after John Schiller stepped down as CEO and President, and promoting chief accounting officer Hugh Menown to CFO after Bruce Busmire announced plans to pursue other interests.
For example, Energy XXI (OTCPK:EXXIQ), which sought Chapter 11 protection in April with $3.6B in debt, reached a tentative restructuring deal two weeks before the OPEC agreement that values its business at ~$600M; shareholders - who could be wiped out in the deal that gives control to bondholers - think the true figure is higher now, but their problem is timing, as energy producers likely would command higher prices as supplies tighten but that may not be enough to change their valuations today.
Breitburn Energy Partners (OTCPK:BBEPQ), which is trying to work out $3B in debt, appears headed for a valuation fight after its bankruptcy judge recently gave shareholders a louder voice in the case; Stone Energy (NYSE:SGY), which has said it may file for bankruptcy this week, may face a similar fight, according to the report.
“The challenge in each case is going to be, how close is one group of creditors or shareholders to starting to get a recovery?” says an attorney in the EXXI case. “And if you have a 10% change in price assumptions, is that enough?”
CorEnergy Infrastructure Trust (CORR -10.8%) is sharply lower despite seeking to reassure investors that a subsidiary of newly bankrupt Energy XXI (EXXI -73.1%) that leases subsea pipelines off the Louisiana coast remains outside Chapter 11 and are intact.
CORR says the bankruptcy filing of EXXI - guarantor of the Grand Isle gathering system lease - and its failure to make interest payments to its creditors would have constituted defaults, but it provided a conditional waiver to certain remedies available to it as a result of non-monetary defaults.
April defaults for U.S. high yield bonds, headlined by bankruptcy filings from Peabody Energy (NYSE:BTU) and Energy XXI (EXXI -72%) plus a missed payment for Linn Energy (LINE -15.4%), now total $14B, after Q1 defaults came in at $15.7B, according to a report from Fitch Ratings.
The trailing 12-month rate for junk bond defaults has surged to a two-year high 3.9%, Fitch says - 12% of all energy companies, 23% of E&P companies with EXXI's $2.8B in outstanding debt, and a 70% rate in the coal subsector including BTU's $8.4B debt.
U.S. crude oil prices have staged a mini-recovery to ~$40/bbl but remain below typical breakeven production costs, so B- or lower-rated E&Ps are struggling in the secondary market, with 57% of those companies bid below $0.50, the ratings agency says.
Energy XXI (NASDAQ:EXXI) has filed for Chapter 11 bankruptcy, becoming the latest victim of the squeeze in the energy sector.
"Over the last several months, we have worked to actively manage our balance sheet, and after thoroughly evaluating our options...we determined that this is best course of action for Energy XXI and all our stakeholders," the company said in a statement.
The oil and gas explorer intends to eliminate about $2.8B worth of debt from its balance sheet through the restructuring.
CorEnergy Infrastructure Trust (CORR +3.9%) is higher after responding to news that two of the three major tenants for its oil and gas pipelines, Ultra Petroleum (UPL +95.7%) and Energy XXI (EXXI +26.7%), are facing financial troubles.
CORR says its major tenants - which also includes Arc Logistics Partners (ARCX +1.2%) - are all in compliance with their lease requirements, including timely payments of March rents.
UPL included going concern language in its recent annual report and warned of potential bankruptcy and default on its lease agreement related to the Pinedale liquids gathering system in Wyoming; CORR owns Pinedale, and says it expects to refinance the remaining balance of its Pinedale term loan prior to maturity at the end of March, leaving ~$65M of liquidity for acquisitions and other corporate purposes.
Earlier: Ultra Petroleum shares +60%, now up 236% the last two days
Energy XXI (EXXI -4.2%) is lower after reporting a larger than expected FQ2 loss and saying it will not make an interest payment due today, as it continues talks with its debtholders on alternatives to improve its capital structure.
EXXI says it has retained PJT Partners LP and Vinson & Elkins as advisers in reviewing its debt; the company has a 30-day grace period to make the interest payment.
EXXI also says its total FQ2 net production averaged 54.5K boe/day (70% liquids), and lowers its FY 2016 guidance to 52K-57K boe/day, down from 54K-59K boe/day; its projected range for full-year capex remains $130M-$150M.