Houston's Ultra Petroleum Corp., which drills for natural gas in Wyoming, has reached a deal with key creditors and shareholders designed to help it exit bankruptcy protection with less debt.
Ultra Petroleum officials said Tuesday in a release the holders of a majority of its senior bond debt and common stock have pledged their backing for a strategy to restructure roughly $3.8 billion in debt.
Such a restructuring would see senior bondholders court papers say are owed $1.3 billion trade their debt for ownership of the reorganized Ultra Petroleum. Bondholders owed nearly $2.5 billion by a company subsidiary would receive new bonds and cash.
Existing shareholders would hang onto a stake in the restructured company, according to a filing with the Securities and Exchange Commission.
What's more, the Ultra Petroleum bondholders and shareholders backing this strategy have also agreed to backstop a $580 million rights offering of new stock in the restructured company, meaning they will buy up any unsold shares.
The deal, which still needs approval from U.S. Bankruptcy Judge Marvin Isgur, came after the unexpected 2014 decline in energy prices prompted Ultra Petroleum officials to negotiate payment breaks with bondholders and lenders who are represented by J.P. Morgan Chase Bank N.A.
Because of the weak energy markets, the company and its affiliates expected to take in less than $300 million in revenue this year—less than half of the amount it took in during 2015, according to documents filed in U.S. Bankruptcy Court in Houston.
"The low commodity prices, and especially the low natural gas prices, that prevailed throughout 2015 and have continued through the first four months of 2016 have had a devastating impact on the [companies'] financial condition, causing their capital structure to become unstable and unsustainable," Chief Financial Officer Garland Shaw said earlier in court papers. "Regrettably, this period of low prices harmed the [companies when they] were also delivering on the operational ambitions of their business plan and achieving some of the best operating results in company history."
Amid negotiations, the company filed for chapter 11 protection on April 29.
Ultra Petroleum, whose stock trades publicly on over-the-counter markets under the UPLMQ ticker, employed 159 people and tended to roughly 1,800 wells at its main operations at the time of the filing. Its workers drill for natural gas underneath roughly 68,000 acres of land in Wyoming it purchased in the 1990s.
Founded in 1979, Ultra Petroleum also pulls crude oil out of northeast Utah land it purchased in December 2013. It sold some of its properties located in Pennsylvania's Appalachian region in September 2014 and hasn't drilled in the state in the last three years, according to court papers.
The company formerly traded on the New York Stock Exchange but was delisted earlier this year.