History
Seven Seas, a Colombia-focused oil explorer, moved to the Cayman Islands, saw its Guaduas reserves questioned, and went through bankruptcy that left shareholders keeping their shares behind creditors.
2001-2002: A new home and a reserves warning
Seven Seas Petroleum earned its revenue in Colombia. In January 2001 it filed to move its legal home from the Yukon Territory in Canada to the Cayman Islands. It gave three reasons: most shareholders were not Canadian residents, its revenues came from Colombia, and the Cayman Islands has no corporate income tax. The filing registered up to 37,836420 shares and said each shareholder's number of shares and percentage ownership would not change. A shareholder vote was set for February 28, 2001.
The record then goes quiet until July 2002. The company said it expected a material cut to the published net proved reserves of 47.6 million barrels at its Guaduas Oil Field, as of December 31, 2001. Output averaged about 6,700 barrels a day, or 3,100 net to the company, and rates had not risen as expected after gas injection began in late May 2002. It gave no size for the cut and expected revised figures by the end of August.
2002-2003: Bankruptcy and reorganization
On December 20, 2002, a group of senior unsecured noteholders filed an involuntary Chapter 7 bankruptcy petition against the company. Seven Seas consented to being treated under Chapter 11, and on January 14, 2003 the court adjudicated it under that chapter and appointed Ben B. Floyd as trustee.
By May 2003 Deloitte & Touche had resigned as auditor, leaving the company without one. The bankruptcy covered only the Cayman parent. The company said its three Colombian subsidiaries, which held the only material assets, were in good financial standing. A court order barred the trustee from spending on annual reports, so the one due March 31, 2003 was missed. The exploration period on the Deep Dindal contract expired April 24, 2003, and the company asked Ecopetrol for an extension to seek financing for the Escuela 2 well. It expected one but said this was uncertain.
The court confirmed a reorganization plan on August 4, 2003, effective August 14. Secured lenders had an allowed claim of $45 million plus interest and fees and received an initial $8.75 million. Other creditors were to be paid from expense savings, holdback proceeds from earlier asset sales and contingent assets. Existing shareholders kept their interests, with 37,934,855 shares outstanding and none reserved for new issuance. Floyd became sole officer and chairman. As of August 26, 2003, creditors were being paid first, and any cash left after claims were paid in full would stay with the reorganized company.
Written from the 5 story beats below (2001 to 26 Aug 2003), which come from the company's own announcements and filings.