History
Warren Resources grew from Wyoming coalbed gas into California oil and Pennsylvania gas, but heavy debt led to Chapter 11 in 2016, with existing shares to be cancelled.
2002-2008: Building the Wyoming and California base
The record opens in December 2002, when Warren sold Anadarko an undivided 50% of its interest in the Atlantic Rim coalbed methane area in Carbon County, Wyoming. Anadarko paid $12 million cash, a $6 million deferred obligation and a $4.3 million cost reimbursement, and became operator of record, with Warren doing drilling work under a services agreement. Each company held 50% of about 66,361 net acres, and Warren kept 100% of about 64,731 acres outside the area.
In December 2004 Warren raised $21 million in a private placement of 3 million units, each a share plus five-year warrants. Days later it signed an underwriting agreement with KeyBanc Capital Markets for an initial public offering of 9,500,000 shares, and the offering was completed. The filings give no price or proceeds.
In December 2005 Warren agreed to buy the North Wilmington Unit oil field in the Los Angeles Basin for $23 million cash, adding a California oil asset. In 2006 and 2007 it bought properties from partnerships it was affiliated with, paying largely in new shares: 383,072 shares at $11.49 in April 2006 and about 3.48 million shares at $10.80 in June 2007. Both deals diluted existing holders.
Debt arrived in November 2006 with a JPMorgan Chase revolving credit facility, whose initial borrowing base was $40 million. A year later it was replaced by a larger facility of up to $250 million led by Merrill Lynch Capital, with $125 million immediately available. In August 2008 the board adopted a shareholder rights plan, a so-called poison pill, that lets other holders buy shares at half price if anyone acquires 20% or more.
2009-2013: Tighter credit and a fresh raising
By May 2009 the lenders kept the borrowing base at $120 million, but borrowing became costlier, with higher interest margins. Warren had $115 million drawn. In October 2009 it agreed to sell up to 11,775,000 new shares at $2.60 each, raising about $29.3 million net, well below the $8.98 to $10.80 paid in the 2007 share issues. The money was meant for resuming development in California and Wyoming and for reducing debt.
In December 2011 a new Bank of Montreal revolver of up to $300 million, with a $130 million initial borrowing base, replaced the 2007 facility. The same announcement said Warren had shut in about 150-200 barrels a day of oil because California regulators were slow to issue water-injection permits.
In October 2012 Warren used preferential rights to buy more Atlantic Rim interests from Anadarko, including 79% of its Spyglass Hill Unit interest for $11.4 million, paid from cash and credit facility borrowings. The record for 2013 is otherwise quiet.
2014-2015: The Marcellus bet and the debt squeeze
In August 2014 Warren closed its purchase of Citrus Energy's Marcellus Shale assets in Wyoming County, Pennsylvania for about $352.5 million. It paid $312.5 million in cash and $40 million in stock, 6,666,667 shares at $6.00. To fund the cash it issued $300 million of 9.000% senior unsecured notes due 2022. Shares on issue rose from 72.8 million at the end of 2013 to 80.7 million at the end of 2014.
The debt then became heavy. In May 2015 Warren replaced the Bank of Montreal facility with a $250 million first lien term loan from lenders led by GSO Capital Partners, at LIBOR plus 8.5%. About $47.2 million of the loans were issued in exchange for $69.6 million of the 2022 notes. Lance Peterson was named interim CEO. In June Warren agreed to sell its shallow Atlantic Rim assets and related interests to Escalera Resources for about $47 million in total; the closing was never seen in the record. That month Nasdaq warned that the share price had been below $1.00 for 30 business days.
In October 2015 Warren signed a roughly $51.0 million second lien loan, with about $11.0 million of new money. Some noteholders swapped about $63.1 million of notes for about $40.1 million of second lien loans and 4,000,000 new shares. The first lien leverage test was also brought forward to June 30, 2016.
2016-2017: Chapter 11
In February 2016 Nasdaq issued a second deficiency notice over the market value of publicly held shares, and Warren had already requested a hearing on delisting. On June 2, 2016 Warren and certain subsidiaries filed for Chapter 11 in the Southern District of Texas, with a restructuring agreement with first lien lenders and a majority of noteholders. A proposed $20 million loan would fund the case.
In July an amended agreement brought in second lien lenders. The plan was confirmed by the court on September 14, 2016. Under it, all common and preferred stock, options and warrants are to be cancelled with no distribution to holders. First lien lenders take 82.5% of the new equity, and second lien lenders, unsecured noteholders and another claimant share 17.5%. In August the exchange filed to remove the shares from listing, and they moved to OTC Pink.
As of August 31, 2016, Warren reported unaudited total assets of about $185.5 million against liabilities of about $564.1 million, with 85,253,929 shares outstanding on September 14. Emergence was expected around September 30, 2016, though it was not confirmed in the record. In April 2017 the company terminated the registration of a class of its securities, ending its reporting obligation for them.
Written from the 24 story beats below (2002 to 28 Apr 2017), which come from the company's own announcements and filings.