Investors chose to bail from the Basic Energy Services, Inc (NYSE:BAS) stock even as the company negotiated a pre-packaged bankruptcy proceeding with its secured term loan lenders and note holders.
The stock erased more than half of its market value after shares hurtled lower on Monday by 51.27% to close at $0.35. Traded volume was 19.07 million shares, more than six times its average volume of 3.04 million.
The company provides a range of well site services in the United States to oil and natural gas drilling and producing companies, including completion and remedial services, fluid services, well servicing and contract drilling.
As Basic Energy heads into bankruptcy restructuring it joins about 100 another North American oil service companies who were forced into bankruptcy during 2015 and 2016 after they were unable to service their debt following the crash in crude prices.
Bankruptcy: Basic Energy Services, Inc (NYSE:BAS) avoids the scenic route
Basic Energy’s restructuring agreement will allow the company to emerge from bankruptcy much faster because the process has the consent of the major lenders. Basic is required to file for Chapter 11 by today under the agreement with the creditors.
The proposed plan will significantly deleverage the Company’s balance sheet and provide the Company with $125 million of additional liquidity.
The creditors have agreed to cancellation of over $800 million of principal and accrued interest and will receive in return 99.5% of the equity of the restructured company.
Existing shareholders will get the balance 0.5% of the restructured equity, though that has potential for further dilution in the event of conversion of new convertible notes to be issued. Shareholders will also receive 7-year warrants that will entitle them to acquire an additional 6% of equity.
Continuity of operations will be assured because all undisputed customer, employee, vendor and other trade obligations will continue to be settled as in the normal course of business.
“The sharp and prolonged period of depressed commodity prices have created poor operating conditions in the field and significantly reduced our operating cash flow,” said Roe Patterson, Basic’s President and Chief Executive Officer. “The actions we have taken, combined with the support of our existing lenders, will help us strengthen our balance sheet and position Basic for a sustainable future to benefit from what we anticipate will be an eventual recovery in oil and natural gas prices.
Basic Energy expects to emerge from bankruptcies by the end of the year.