California Oil Driller Venoco Files Bankruptcy After Spill

  • Price slumps also cited in company's Chapter 11 filing
  • Venoco joins energy defaults in expected $19 billion wave

Oil driller Venoco Inc. filed for bankruptcy protection Friday, citing the persistent slump in crude markets and a spill that hampered some of its production along the California coast near Santa Barbara.

The petition filed in Delaware court listed as much as $1 billion in debt. The company said it has the support of some lenders on a restructuring plan. Denver-based Venoco’s primary assets are oil-weighted and located onshore and offshore in Southern California. It also has an interest in the Hastings Field onshore along the Gulf Coast of Texas, according to its website. It was founded in 1992 by Timothy Marquez.

Despite the strong asset base, Venoco, like many of its peers, “struggled this past year to maintain liquidity as a result of the protracted and continuing decline in oil prices and the general dislocation of the energy markets,” Chief Financial Officer Scott M. Pinsonnault said in a court filing. He also blamed the May 2015 shutdown of a pipeline that carried some of its oil. 

The pipeline ruptured, resulting in a spill near Refugio Beach State Park and halting Venoco’s production at its South Elwood Field location, 2 miles (3.2 kilometers) off the Santa Barbara shore, according to court filings.

Environmentally Sensitive

Before the oil market soured, Venoco had set itself apart by an ability to operate in environmentally sensitive areas, becoming one of the largest producers in California, it said. In 2006, it went public on the New York Stock Exchange. In 2012, an affiliate owned by Marquez took the company private again.

Venoco has the support of senior secured noteholders on a restructuring plan, the company said. Its properties in California have proven reserves and stable production, and overall it has around 160 employees, according to court filings.

The company’s debt includes $175 million in 12 percent first-lien senior secured notes due 2019, $164.1 million in second-lien secured notes, $308.2 million in 8.875% senior notes and $303 million outstanding under another set it refers to as its senior PIK toggle notes.

Venoco said it has been trying to restructure since November 2014, when it hired Blackstone Advisory Partners LP. It skipped an interest payment last month, and had been trying to cut a deal with creditors by March 17. 

Default Wave

Competitors such as Energy XXI Ltd., SandRidge Energy Inc. and Goodrich Petroleum Corp. have all announced missed debt payments, as the market braces for what’s expected to be a $19 billion wave of defaults in the sector.

Oil has been staging a comeback after falling below $30 a barrel earlier this year, rising above $40 and headed for its fifth weekly gain. But that’s nowhere near the $100-plus range from the summer of 2014, before the start of the long slide that’s pushed dozens of drillers into Chapter 11. Since the start of 2015, about 50 oil and gas producers have gone bankrupt, owing a total of more than $17 billion, according to law firm Haynes & Boone.

The case is In re Venoco Inc. 16-10655, U.S. Bankruptcy Court, District of Delaware (Delaware.)

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