On Wednesday Linn Energy became the largest oil and gas driller to file for bankruptcy protection since energy prices began their slide in 2014.
The company said it had reached an agreement with creditors to reorganize the company and planned to continue operating through the Chapter 11 bankruptcy process. Linn Energy reported about $8.3 billion in debt and employed 1,650 workers, including at its downtown Houston headquarters.
Mark E. Ellis, Chairman, President and Chief Executive Officer, said, “We believe the Restructuring Support Agreement reflects the confidence of our first lien lenders in the quality of our assets and represents an important step forward for the Company. After our review of the available options, with the assistance of our financial and legal advisors, we determined that this court supervised financial restructuring process is the best course of action for the Company and our stakeholders. Like many others in our industry, LINN has been impacted by continued low commodity prices. We believe that these steps will provide us the financial flexibility to successfully manage in the current commodity price environment and, when combined with constructive agreements with our remaining creditors and potential third party financing, will provide a platform for future growth.”
Mr. Ellis continued, “Importantly, we expect to continue normal operations across our diverse and high-quality asset base. The hard work and dedication of our employees has enabled us to achieve strong operational results, and we are truly grateful for their commitment to safety and to driving the Company’s success. Together, we look forward to working cooperatively with our vendors, suppliers and partners as we move through this process.”
The filing comes after Linn Energy spent 2015 struggling with low prices and high debt and much of 2016 flirting with bankruptcy.
Linn Energy is one of the few oil producers designed to function like a partnership that pays out its cash flow to investors, and it sought to ensure those payments were safe by selling hedges on future production. In October, Linn Energy suspended those payments to preserve cash, but that wasn’t enough to make debt payments.
Linn Energy put off its creditors while it sought more time to negotiate with lenders. In March, the company said that bankruptcy “may be unavoidable.”