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Law360 (July 21, 2020, 8:49 PM EDT ) Oil well services company Patriot Well Solutions filed for Chapter 11 protection in Texas bankruptcy court on Tuesday, saying it is seeking a going concern sale as it deals with the fallout of an oil price war and the coronavirus pandemic.
In court filings Tuesday, the Colorado-based company said the Saudi Arabia-Russia oil price war and the collapse in demand caused by the pandemic that have sent many energy sector companies into Chapter 11 had caught up with Patriot as well, making an asset auction the best way forward.
As of the petition date, the company had about $36 million in funded debt along with $15.7 million in unsecured liabilities, mostly trade debt, Chief Restructuring Officer Matthew Foster said in the Chapter 11 declaration.
"Although Patriot was well-positioned with major customers, the downward acceleration in overall drilling and completion activity outpaced the severe measures Patriot had already taken to reduce cost and sustain its business operations," he said. "Monthly revenue decreased from a peak of $16.9 million in June 2019 to less than $3.2 million in June 2020."
He said the problem became worse when $3 million revolving facility lender JPMorgan Chase NA suspended borrowings. Majority equity holder White Deer Energy stepped in as revolving lender, but Patriot was still facing possible foreclosure of its leases and $17.6 million term loan and was unlikely to find new financing with its "current capital structure," he said.
He said the company subsequently negotiated $9.4 million in debtor-in-possession financing and an asset purchase agreement with White Deer, with the goal of putting the company up for auction as a going concern in Chapter 11.
"While management is confident in the Patriot's ability to return to the 2018 and 2019 performance levels, Patriot is in need of funding to weather the current economic climate and return to consistent profitability," Patriot said in an announcement Tuesday.
Patriot provides a variety of well maintenance services for the oil and gas industry in Texas, Colorado, New Mexico, North Dakota and Wyoming. It has 145 full-time employees, 36 of whom are currently furloughed, according to court filings.
The company said it has retained Sonoran Capital Advisors as its financial advisor and Simmons Energy as its investment banker.
Patriot is represented by Travis A. McRoberts, Kelly E. Singer, Christopher J. Giaimo and Jeffrey N. Rothleder of Squire Patton Boggs LLP.
The case is In re: Patriot Well Solutions LLC, case number 20-33642, in the U.S. Bankruptcy Court for the Southern District of Texas.
--Editing by Alanna Weissman.
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