History
Crimson grew from the small GulfWest into a Texas-focused gas and oil producer through debt-funded deals, then was folded into Contango Oil & Gas in 2013.
2001-2006: From GulfWest to Crimson
The company began this record as GulfWest Energy Inc. In August 2001 it bought five oil and gas properties in Louisiana and Texas from Grand Goldking L.L.C. for $14.5 million: $10 million in cash and 9,000 Series E preferred shares valued at $4.5 million. The filing said the deal raised proved reserves by about 20%. It was paid for with an expanded credit facility from Aquila Energy Capital Corporation, and the preferred shares could convert into common stock at $2.00 each, which could dilute common holders.
In July 2003 GulfWest signed a letter of agreement to pursue a merger with Starlight Corporation. The filings do not say whether it was completed. In April 2004 it closed a $22 million financing, made up of $18 million of debt from Petrobridge Investment Management and $4 million of preferred stock sold by a subsidiary. It used the money to refinance its largest debt and cut total debt by about $10 million, or 26%. Petrobridge received warrants for 2,035,621 common shares at one cent each.
By July 2005 the company was named Crimson. It signed a $100 million revolving credit facility with Wells Fargo, with an initial borrowing base of $20 million, and replaced its auditor, Weaver and Tidwell, with Grant Thornton. Weaver and Tidwell's report on the 2003 accounts had raised substantial doubt about the company's ability to continue as a going concern. In March 2006 Crimson bought Core Natural Resources, whose main assets were leases on about 22,000 undeveloped acres in Culberson County, Texas, for about 3.7 million new shares plus cash and the payoff of Core's debt. In August 2006 it added a $150 million second-lien facility, a loan that ranks behind the main bank debt.
2007-2008: Buying big with borrowed money
In May 2007 Crimson's subsidiary agreed to buy South Texas and Gulf Coast properties from EXCO Resources for $285 million cash plus 750,000 Crimson shares. The properties had about 250 producing wells in over 30 fields. To pay for it Crimson took on a new $400 million senior revolver and a $150 million second-lien loan from Credit Suisse, which also repaid the 2006 second-lien facility. The filing noted that Oaktree, which controlled Crimson, had a managing director on EXCO's board. The deal sharply increased Crimson's debt.
In June 2008 it completed another purchase, paying $65 million in cash from the revolver for interests in four South Texas gas fields from Smith Production. These brought about 7 million cubic feet equivalent of gas a day from 137 wells. Share counts show 5,787,287 shares at the end of 2008, but the beats do not explain that figure.
2009-2010: Covenant pressure and a big equity raise
By 2009 the debt was straining the company. In July the banks amended the revolver, raising borrowing costs and loosening its debt limits for the June quarter. In November lenders waived the covenants again for the September quarter. Crimson issued a $10 million unsecured note to Wells Fargo, backed by $10 million that Oaktree put in escrow, and paid Oaktree a $2 million subordinated note for that support. The revolver then stood at $129.5 million outstanding.
The turning point came in December 2009, when Crimson sold 20 million new shares at $5.00 in a public offering, raising about $93.1 million after costs. Of that, $83.1 million repaid revolver debt, and the Series G and H preferred shares converted into about 12.1 million common shares. Shares on issue rose to 38,516,658 by year end.
In October 2010 it sold 4,250,000 shares at $5.00 to America Capital Energy Corp, a US arm of Shanghai Zhong Rong Property Group, raising $21.25 million. That buyer also held a 60-day option on preferred shares worth $8.75 million. The shares on issue were 44,857,259 at the end of 2010. In December Crimson reported proved reserves of 154.3 billion cubic feet equivalent at September 30, 2010, up about 58% from 97.5 at the end of 2009.
2011-2013: A shift to oil and the Contango merger
In March 2011 Crimson reported year-end 2010 reserves of 166.5 billion cubic feet equivalent. Production for 2010 was 12.9 billion, below 14.9 billion in 2009. It set a $60 million 2011 budget focused on oil and liquids-rich targets. In April its first Karnes County Eagle Ford well began producing 876 barrels of oil a day, and management planned to move more capital there.
In May 2012 Crimson amended its Wells Fargo revolver, extending maturity to May 31, 2015 and cutting its interest margin. The record is quiet on much else in 2012.
On April 29, 2013 Crimson agreed to be bought by Contango Oil & Gas in an all-stock deal, with each Crimson share becoming 0.08288 Contango shares. Former Crimson holders would own about 20.3% of Contango. Oaktree affiliates and executives, holding about 37.25% of Crimson, agreed to vote in favor. Shareholders approved on October 1, 2013, with 31,078,074 votes for and 3,771,553 against.
The merger closed that day. Crimson became a wholly owned Contango subsidiary, and holders received about 3.9 million Contango shares in total. Its Wells Fargo facility and $175 million second-lien loan were terminated, the latter with a 1% prepayment fee. Trading on Nasdaq was suspended on October 2, and the registration of its securities was ended on October 28, 2013. Crimson's last reported assets were about 95,000 net acres. Allan Keel joined Contango's board.
Written from the 25 story beats below (2001 to 28 Oct 2013), which come from the company's own announcements and filings.