Bonanza Creek Energy: How Bankruptcy News Led To A 55% Rise

Bonanza Creek Energy Inc BCEI is a nano-cap independent energy company engaged in the acquisition, exploration, development and production of onshore oil and associated liquids-rich natural gas in the United States. Shares soared higher by more than 50 percent on Wednesday.

The surge followed the company's announcement that it has filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the District of Delaware to pursue a prepackaged plan of reorganization.

Emergence from Chapter 11 is expected before the end of the first quarter of 2017. In the meantime, the company will operate as a debtor-in-possession under jurisdiction of the bankruptcy court.

Timeline Of Events

Bonanza Creek's announcement is in accordance with its previously announced restructuring support agreement with some of its note-holders and one of its crude oil purchase and sale counterparties.

On December 23, Bonanza Creek said it had entered into a RSA with bondholders holding more than $400 million in unsecured debt. The company also disclosed that it will commence its prepackaged bankruptcy case on or before Thursday.

On Wednesday, the company confirmed that its RSA and prepackaged plan of reorganization will result in a "substantial deleveraging transaction" in which the company will transform its balance sheet by equitizing around $867 million of its existing unsecured bond obligations and substantially bolster its liquidity position through a $200-million rights offering for new equity.

"We look forward to completing the restructuring quickly with minimal disruption to our business, and anticipate meeting ongoing obligations to our employees, customers, vendors, suppliers and others throughout the Chapter 11 process," Bonanza's CEO Richard Carty said. "The filing of our prepackaged bankruptcy cases with the Bankruptcy Court is a significant milestone in the process to achieve financial stability and reposition Bonanza Creek with a strengthened liquidity position to execute on our extensive asset development opportunities."