Bruin E&P Partners LLC and its affiliates (“Bruin”), a Houston oil and gas company backed by private equity firm ArcLight, filed for Chapter 11 bankruptcy protection on July 16, 2020 in the Southern District of Texas. Like other companies in the oil & gas industry, the coronavirus pandemic has reduced global need for fuel and has affected the profitability of energy companies, causing a major disruption to the business.
Through the bankruptcy, Bruin seeks to optimize its balance sheet and restructure its capital in response to a potentially future volatile period in the oil market. The threat of a second wave of global lockdowns and tensions between Saudi Arabia and Russia give rise to uncertainty ahead.
In the detailed liquidation analysis provided in Bruin’s disclosure statement, Bruin shows a potential recovery between $173 million and $226 million. In another exhibit to the disclosure statement, forecast revenue for the following three years is set to fall between $209 million and $152 million. Expected costs should allow a profitable EBITDA to be achieved, however, the bottom line should be a net loss for each year. Bruin’s proposed plan of reorganization may be viewed here.
The net loss after tax, depreciation and amortization is mostly due to high depreciation rates. Capital expenditure is forecast in low numbers for cash flow management purposes. Bruin currently has approximately $20 million in cash at banks and intends to keep an identical level of liquidity for the following three years.
Bruin’s filing for chapter 11 bankruptcy is not a last resort but a strategic financial decision as it intends to continue day to day operations. There are no significant changes expected either to top management or the board of directors, and employee obligations should be honored as the company holds sufficient cash for anticipated expenses.
The cases are pending before the Honorable Marvin Isgur and are being jointly administered for procedural purposes under case number 20-33605.
Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Wilmington, Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.