As Stone Energy Corporation (NYSE:SGY) hurtles towards bankruptcy, it closed at $6.30 Friday, down 34.98%.
This was the stock’s second major gap-down loss inside six trading sessions. On October 17, it lost 13.3% after Barclays downgraded the company from Equal Weight to Under Weight, with a price target of $3.00.
Barclays apprehend that Stone Energy may be forced to enter a “reorganization transaction that could result in substantial downside to the current equity value.”
Those fears may not be unfounded.
Stone Energy Corporation (NYSE:SGY) prepares for bankruptcy
The company announced Friday a comprehensive restructuring agreement alongside a disposal of its assets in the Appalachia basin.
The company’s RSA with certain note-holders assures their support to a restructuring on the terms of a pre-packaged plan of reorganization. The company announced that it will file for relief under chapter 11 of the United States Bankruptcy Code by December 9, 2016.
“The execution of the RSA is the culmination of months of hard work to right-size our balance sheet in response to a sustained period of low oil and natural gas commodity prices,” said David Welch, Chairman, President and Chief Executive Officer. “The agreement with our Noteholders will provide value to all of our stakeholders, improves our liquidity and better positions us to be profitable during a historically difficult time in our industry. Importantly, this agreement will allow all stakeholders to share in potential valuation growth if commodity prices improve.”
Stone Energy Corporation (NYSE:SGY) sells Appalachia assets
Stone also agreed to sell its Appalachian assets for $360 million to TH Exploration III, LLC, an affiliate of privately held Tug Hill, Inc.
Tug Hill currently operates a concentrated acreage position in the Appalachia basin in Marshall and Wetzel Counties, West Virginia and South Texas, according to its website.
The Company plans to enhance its presence in the area through strategic acquisitions as well as leasing arrangements, it says.
According to Stone Energy, the sale of these assets will facilitate the restructuring process and enable it to focus on its operations in the Gulf of Mexico, which is vital to its long term business plan.