The U.S. Bankruptcy Court for the District of Delaware has approved Denver-based, Venoco’s Combined Disclosure Statement and Chapter 11 Plan. The announcement herald’s Venoco’s second exit from Chapter 11 proceedings in under a year; the first exit having occurred pursuant to a successful restructuring that completed in July 2017. Upon emergence from that bankruptcy, Venoco eliminated more than $1 billion in liabilities, escaping from what the Company then described as 2016’s “historic collapse in the oil and gas industry.”
Fundamental challenges from 2016 remained, however. Repairs to a ruptured pipeline, originally anticipated for 2017, got pushed back by 4-7 years; causing a “complete shut-in” for a critical platform. Additionally, the Company faulted changes in the State of California’s policies towards oil and gas activities in state waters, notably as they relate to the “derailment” of a key lease line arrangement (LLA) on which the 2016 bankruptcy Plan was “highly dependent.” In April 2018, matters came to a head when the issuer of a majority of its surety bonds asked Venoco for $35 million in additional capital; capital it did not have. Several days later, Venoco, concluding it could not sustain operations as a going concern, filed for Chapter 11 protection.
Pursuant to the Plan announced on May 22nd, Venoco will be liquidated and dissolved. Holders of secured claims are expected to have a 100% recovery; and either be paid in full in cash, have their claims reinstated, receive the proceeds from the distribution of the collateral securing their claims or receive the collateral. Holders of convenience claims will receive a share of liquidating trust assets that will result in an estimated 60% recovery. Holders of general unsecured claims will receive a share of liquidating trust interests that will result in an estimated 2-5% recovery. Holders of interests and subordinated claims will not have any recovery.
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