A natural gas explosion last September in a pipeline not yet in service has led to an independent producer backed by Goldman Sachs’s private equity arm and the Ontario Teachers Pension Fund filing for Chapter 11 bankruptcy, Kallanish Energy reports.
EdgeMarc Energy Holdings plans to sell all of its assets, the company said Wednesday, blaming an explosion in Energy Transfer’s Revolution Pipeline in Beaver County, Pennsylvania, for ending the producer’s plans to sell Devonian and Marcellus Shale gas from newly drilled wells.
(Seeing story elsewhere in this issue for additional information concerning the Revolution line.)
Unable to fulfill contracts
“Since the explosion of the Revolution pipeline in 2018, EdgeMarc’s production has been significantly curtailed and the company has been unable to satisfy its long-haul firm transportation contracts,” said Callum Streeter, EdgeMarc’s CEO.
Following a review of all possible alternatives to ensure the company’s long-term ability to develop natural gas and NGL-rich assets, the EdgeMarc board and management team determined a sale is the best path forward for all stakeholders, according to Streeter.
According to the Chapter 11 filing (reviewed by Kallanish Energy), Pennsylvania-based EdgeMarc and eight affiliates filed for bankruptcy. The companies’ total creditors number between 1,000 and 5,000, total assets are between $100 million and $500 million, and liabilities range between $100 million and $500 million.
Court-supervised sale
EdgeMarc intends to implement the asset sale under Section 363 of the U.S. Bankruptcy Code, allowing the company to provide for an orderly sale of its assets in a court-supervised environment.
The auction of substantially all of EdgeMarc’s assets is expected to take place on Aug. 14. EdgeMarc expects all of its operations and well sites not contracted with the Revolution line to operate without disruption during the sale process.
Customers, lessors and employees of those operations should see no interruption as a result of this process.
Dip financing through KeyBank
In conjunction with the proposed transaction, EdgeMarc has received a commitment for roughly $108 million in debtor-in-possession (Dip) financing from KeyBank, its primary existing lender.
The Dip includes $30 million in new money financing and roughly $78 million of “roll up” loans to refinance all outstanding debt owed to KeyBank.
Upon Bankruptcy Court approval, the new financing and cash generated from the Company’s ongoing operations will be used to support the business throughout the Chapter 11 proceedings and sale process.
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