Seventy Seven Energy spun out of Chesapeake Energy in 2014
By Tom Hals
June 7 (Reuters) – Oilfield services company Seventy Seven Energy Inc filed for a prepackaged Chapter 11 bankruptcy on Tuesday to carry out a plan to convert $1.1 billion of its debt into equity in a reorganized company.
Seventy Seven offers drilling and hydraulic fracturing services and was spun out of Chesapeake Energy Corp in 2014.
Several months after the spinoff, about 5,200 participants in Seventy Seven’s retirement plan had $54.5 million, or about one-third of their investments, in Chesapeake shares, according to the 2014 annual report for the plan. Since the end of 2014, Chesapeake shares have dropped 76 percent, trading on Tuesday afternoon at $4.70 on the New York Stock Exchange.
The slide in oil prices this year, which have plumbed their lowest levels in over a decade, has wiped out several billion dollars of retirement wealth in the energy sector in the past year. The losses may prove temporary for companies that successfully navigate the crisis, but tens of thousands of employees of struggling firms may see much of their nest eggs gone for good.
Meanwhile, Seventy Seven said its creditors have already voted overwhelmingly in favor its plan, a process known as a prepackaged bankruptcy.
“The successful completion of the solicitation process and today’s filing represent the next step forward in our financial restructuring,” Chief Executive Officer Jerry Winchester said.
The bankruptcy comes as two years of depressed energy prices have forced scores of oil-and-gas producers into bankruptcy. Oil industry service companies have also suffered and on Monday contract drilling company Hercules Offshore Inc filed its second bankruptcy in a year.
Oklahoma City-based Seventy Seven said its suppliers would be paid in full and operational contracts will remain in place.
The company listed assets of $1.7 billion and debts of $1.8 billion, as of April 30, in documents filed in the U.S. Bankruptcy Court in Wilmington, Delaware.
The company will seek to borrow up to $100 million to help finance operations during the bankruptcy, according to court documents.
The two largest shareholders of Seventy Seven are Icahn Capital LP and BlackRock Inc, with stakes of 8.1 percent and 4.6 percent, respectively, according to court filings.
The company’s plan would cancel its existing stock, which was up slightly at 7 cents in midday trade over the counter. The stock traded at more than $25 a share after it was spun off by Chesapeake.
(Reporting by Tom Hals in Wilmington, Del., and Tim McLaughlin in Boston; Editing by Matthew Lewis)