Gulfport files for bankruptcy after M&A spree and price crash

Houston

NATURAL gas producer Gulfport Energy Corp filed for bankruptcy, joining a slew of US energy companies that are collapsing after the global pandemic deepened their struggle with low prices and too much debt.

The Oklahoma City-based driller filed a Chapter 11 petition on Nov 13 in US Bankruptcy Court in Houston, declaring an estimated US$2.5 billion in liabilities as at Sept 30.

Gulfport, which produces gas from fields in Ohio and Oklahoma, was grappling to stay afloat even before Covid-19, after a series of acquisitions over the past decade left it too indebted to weather the energy rout.

Following pressure from activist investor Firefly Value Partners to change its board, the company on Aug 7 warned that it might not be able to stay in business if it failed to refinance its debt.

Many investors have shunned producers operating outside of the Permian Basin of West Texas and New Mexico, the most prolific US oil patch, amid growing doubts about their ability to generate returns.

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BlackRock Inc, with 12.9 per cent, is the biggest controller of voting shares in Gulfport.

The Scoop shale play in Oklahoma, one of the areas where Gulfport bought assets, moved from being an exploration hot spot a few years ago to an area of little relevance after its geology proved too challenging.

There are just a few drilling rigs remaining in the state, down from over 200 in 2014, according to Baker Hughes data.

More roadblocks appeared when Covid-19 prompted widespread lockdowns that decimated global demand for fuels.

More than 230 oil and gas explorers have filed for bankruptcy since 2015, with total debt of over US$150 billion, according to a July report from law firm Haynes and Boone.

Gulfport's ability to reject gas transportation service agreements with Rockies Express Pipeline LLC under bankruptcy could be limited after the Federal Energy Regulatory Commission recently declared them in public interest.

The largest unsecured creditor is UBM Financial Corp which holds about US$1.8 billion of notes due 2023 to 2026, according to the filing.

Gulfport shares, which traded as high as US$3.38 in December 2019, were worth about 24 cents as at the company's Chapter 11 filing. BLOOMBERG