Memorial Production, now named Amplify Energy, exits bankruptcy

By Caroline Salls

Pittsburgh, May 4 – Memorial Production Partners LP completed its financial restructuring and emerged from Chapter 11 bankruptcy as a new corporation under the name Amplify Energy Corp., according to a company news release.

The company also announced that it hired Jefferies LLC as lead adviser and has initiated a process to explore and evaluate potential strategic alternatives, which will include marketing some non-core assets for sale.

Through its financial restructuring, Amplify said it eliminated more than $1.3 billion of debt from its balance sheet and significantly enhanced its financial flexibility.

Additionally, the company said it is moving forward as a corporation for U.S. federal income tax purposes.

“This is an important day for our company and our stakeholders,” president and chief executive officer William J. Scarff said in the release.

“In addition to strengthening our financial position, we have made great strides organizationally that will position the company to generate significant free cash flow, drive growth and achieve long-term success.

Following the completion of the financial restructuring, Amplify will have 25 million shares of its common stock outstanding.

Memorial Production’s pre-packaged plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas on April 14. That plan is based on a support agreement with some of the company’s noteholders and lenders.

Restructuring terms

The restructuring terms include the following:

• Cancellation of more than $1.1 billion principal amount of outstanding notes, with noteholders receiving 98% of the common equity interests of the restructured company. Noteholders may elect to receive another $24.6 million in cash;

• Providing the partnership’s limited partners with a recovery in the form of 2% of reorganized equity and five-year warrants to acquire another 8% of the total outstanding equity in the reorganized company at an exercise price based upon the outstanding principal amount plus accrued interest;

• Structuring to try to minimize the negative tax impact of cancellation of debt income to the partnership’s existing limited partners with the partnership expected to emerge from a financial restructuring plan as a corporation for U.S. federal income tax purposes; and

• Ensuring full payment of “ordinary course trade obligations.”

Share listing

As previously reported, the company informed Nasdaq that it does not intend for the shares of Amplify Energy to be listed on that exchange. The company is in the process of registering for its shares to be traded and quoted on the OTCQX or OTCQB market.

Amplify said it expects the new listing to take effect during the second quarter.

Additionally, the company’s reserve-based revolving credit facility has been amended and restated and the maximum revolving lending commitments under the facility reduced to $1 billion, with an initial available borrowing base of $490 million, to be provided by existing lenders.

The reorganized company’s total debt outstanding will be $430 million, and cash on hand will be $14 million, providing total liquidity of $72 million.

The next scheduled redetermination of the revolver borrowing base will be in November, Amplify said. As of Thursday, the mark-to-market value of the company’s hedge book was about $87 million.

New board members

Effective May 4, Amplify Energy’s directors are Scarff, Axys Capital Management chief executive officer Christopher Hamm, former Memorial Production board member Michael Highum, Fir Tree Partners managing directors and partners Evan Lederman and David Proman, Millennial Energy Partners managing partner Drew Scoggins and Citadel LLC senior analyst Alex Shayevsky.

“Looking ahead, I am confident that our team will deliver long-term value for all stakeholders,” Scarff said. “The company’s go-forward business plan and significant additional detail on each of our assets will be set forth in an emergence deck that we plan to release in the coming weeks.”

Memorial is focused on the acquisition, production and development of oil and natural gas properties in the United States. The Houston-based company filed bankruptcy on Jan. 16 under Chapter 11 case number 17-30262.

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