History
PetroShare built a Colorado Wattenberg acreage position with Providence-linked money and rising debt, sold its non-operated wells in 2019, then filed for Chapter 11 in September 2019.
2015-2016: Building a Wattenberg acreage position
In early 2015 PetroShare was a small Colorado explorer with two Niobrara wells it operated in the Buck Peak Field awaiting fracture stimulation (a high-pressure treatment to free oil). Its 2014 auditor's report had carried a going-concern doubt, based on nominal revenue, operating losses and accumulated deficit. In March it agreed to take a lease on about 309 net acres in Adams County in the Wattenberg Field, for $725,252, though closing depended on finding working capital. In May it changed auditor to SingerLewak after StarkSchenkein's staff moved there, with no disagreements.
In November 2015 it raised money through underwriter Noble Financial Capital Markets, selling 4,260,000 new shares at $1.00. Shares on issue rose from about 17.0 million at the end of 2014 to 21.6 million at the end of 2015.
In 2016 the company bought acreage steadily, and its principal lender, Providence, repeatedly took half of each deal. In April it bought Kerr-McGee leases for $1,180,547 and Equinox leases for $576,122. On June 30 it closed a purchase from PDC Energy of leases on 2,690 net acres and about 72 wells for $4,611,833 after a title-defect holdback, with Providence Energy Operators, a 13.8% shareholder, taking half. In October it bought Jacobucci royalty interests for $1.9 million and signed a revolving credit line of up to $10 million with Providence Energy Partners III, at 8%, due April 2017 and secured on its Wattenberg assets. In November the New York Stock Exchange certified its securities for listing. In December it closed the Crimson purchase, about 11,218 net acres and 38 wells, for $5,119,704, again half-funded by Providence, with the rest drawn on the credit line.
2017: Convertible notes and dilution
To fund its growth beyond the Providence line, PetroShare ran a private placement of units, each a 10% unsecured convertible note plus warrants at $3.00. Closings from December 2016 to January 30, 2017 raised $10,000,000, with GVC Capital paid $1,000,000 in commissions plus warrants. Notes converted at $1.50 per share.
In February it agreed to buy Morning Gun acreage, closing in April at a net price of $1,284,589, paid partly with 450,000 new shares. Providence again took half.
Strains showed in June, when the supplemental credit line, about $3.6 million outstanding, was not repaid on its due date. Providence extended it, the rate rose from 8% to 10%, and the company widened Providence's rights to join future acquisitions. In September it sold $1,695,000 of 15% convertible notes, and Providence waived any default in exchange for conditions, including 250,000 shares for Providence Energy Operators and a higher interest rate on the initial credit line. In October it sold $4,724,900 of 15% Series B notes in total, and offered holders of the earlier notes a cheaper $1.10 conversion price. About 4.82 million shares were issued on conversion, and shares on issue rose from 21.96 million to 27.72 million by the end of 2017. In December it borrowed $5 million from a Providence affiliate to pay overdue accounts payable, giving the lenders penny warrants over 1,500,000 shares and the right to name up to three directors.
2018: Lender control
On February 1, 2018 PetroShare signed a $25 million secured term credit agreement with Providence Wattenberg, LP and 5NR Wattenberg, LLC, made up of the $5 million already advanced plus $20 million at closing. It carried 14% interest plus the greater of 3-month LIBOR or 1%, was due February 1, 2020, and was convertible into stock at $1.15 and $1.55. The lenders also gained preemptive rights, a stock purchase option and consent rights over equity, debt, asset sales and key hires. Proceeds repaid the $5.5 million PEO line and part of the PEP III line, leaving $2.1 million due June 30, 2018. The company said its Shook pad wells were drilled, cased and cemented.
In June 2018 it hired Seaport Global Securities to advise on strategic and financing alternatives, including selling some or all assets or a merger. The 10% notes and Series B notes matured on December 31, 2018 and went into default.
2019: Asset sale and Chapter 11
In January 2019 PetroShare agreed to sell its non-operated horizontal wells in the Wattenberg Field for $16.5 million. The sale to Grizzly Petroleum Company closed on February 27 for about $15.5 million net cash. The lenders allowed it only on condition that the proceeds go into an account they controlled and they decided how it was used. The company kept its operated Shook Pad wells.
On September 4, 2019 PetroShare and its subsidiary CFW Resources, LLC filed for Chapter 11 bankruptcy in Colorado. The company blamed Colorado's new regulatory environment and weak investment conditions, and said it might recapitalise or sell some or all assets. It warned that the stock was highly speculative and that its price might bear little relation to any recovery for shareholders. As of that date, no outcome for shareholders had been stated.
Written from the 27 story beats below (2015 to 4 Sept 2019), which come from the company's own announcements and filings.