Swift Energy’s bankruptcy was
caused by “the usual suspects”
of lower commodity prices and
“large investments with too
much leverage,” which is “kind
of the common theme with all
of these bankruptcies in the
energy space.”—Marc Rowland,
director and chairman, Swift
Energy Co., and founder and
senior managing director, IOG
Capital LP
lion in third-quarter 2014. Net
cash used in operating activities for third-quarter 2015 was
$1 million compared with
$81.9 million in the same period a year earlier.
Rowland almost modestly describes the bankruptcy
proceedings as “expeditious.”
The firm emerged fewer than
4 months after it filed having
closed on its new $320-mil-
lion senior secured credit facility and its $48.75-million
sale to Texegy LLC of 75% of
the firm’s holdings in South
Bearhead Creek and Burr
Ferry fields of central Louisiana. The firm later sold the
remaining 25% interest in the
fields to an undisclosed buyer
for $8 million, exiting Louisiana completely. Rowland said
Swift Energy didn’t believe those proved developed producing assets had growth potential and the offers surpassed the
assets’ values to the firm going forward.
Swift Energy’s prepackaged plan “kept the senior secured
revolving bank line creditors whole,” he explained. Note-holders behind the first lien creditors became “the vast majority of the shareholdings of the common units in exchange
for the debt being canceled.” Strategic Value Partners LLC
and DW Partners LP, both of New York City, hold more than
50% of Swift and “basically directed the company through
the bankruptcy process,” he said.
Following the firm’s emergence, then-Chief Executive Officer Terry Swift declared it was “a new era for Swift.” Now,
under the leadership of Sean Woolverton, who helped oversee the reorganization process at Samson Resources Corp.,
the firm is “all in” on South Texas. Rowland was previously
familiar with Woolverton, who worked at Chesapeake from
2007 to 2013 and was well-acquainted with the Eagle Ford.
Samson itself emerged from bankruptcy in March.
Swift Energy’s net operational capital budget for 2017 is
expected at $85-95 million. The firm plans to run one rig in
the Eagle Ford to complete 12 wells, completing nine in its
Fasken field in Webb County, drilling and completing two
on its AWP field acreage in McMullen County, and drilling
and completing its first well in Oro Grande in LaSalle County. All drilling activities will target the Lower Eagle Ford.
The budget largely targets acreage on which the firm has
already drilled. The firm also maintains an active hedge pro-
gram “to provide for predictable cash flows while still al-
lowing for flexibility in capturing increases in prices.” As of
Jan. 20, the firm had hedges in place for more than 70% of
expected gas and oil production at average weighted prices
of $3.10/MMbtu and $48.10/bbl, respectively.
Rowland noted a recent private equity offering to existing shareholders of $40 million “was used to reduce [Swift
Energy’s reserve-based lending facility] and get it into a conforming status, so we have quite a bit of capital unutilized
on the RBL. “We have operating cash flow this year” that
will furnish a budget well above that of 2015 and 2016. “We
hope to become relisted on the Stock Exchange and we hope
to seek out opportunities that would be funded by a combination of cash flow and additional equity or debt issuance,”
he said. “No different from any other company that’s trying
to create value.”
Changed lending environment
Rowland observes that bank financing in the US upstream
industry “has changed dramatically” over the last couple of
years. Banks are still lending, but “it’s a much smaller pool”
still active in the market. “You’ve got probably a universe
that may have been 50 players that were active going into the
bust sorted down to maybe 25 or so, and the 25 that remain
are much more conservative either because that’s the right
thing to do or because the [Office of the Comptroller of the
Currency (OCC)] has forced them to be more conservative.”
Gone are the days, Rowland said, of bank financing in
unitranche situations, for example, where conventional
