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Oilfield services company Seventy Seven Energy Inc. (SSEI) became the next victim of the chronic oil price downturn on Tuesday, when it filed for a prepackaged Chapter 11 bankruptcy package that would allow the entity to convert $1.1 billion of debt into equity under a restructured corporation.
The company, which offers drilling and hydraulic fracturing (fracking) services, had been part of Chesapeake Energy Corp. until 2014, when it spun off and became its own entity. SSEI boasted a share price of $25 dollars when it became independent, but on Tuesday, its price stood at just seven cents.
Chesapeake, the biggest shale gas producer in the world, has had troubles of its own over the past year. During the first quarter of 2016, the firm had a negative cash flow from operations, meaning revenues did not cover the operating costs, much less capital expenditures such as drilling and completion.
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Creditors have “voted overwhelmingly in favor” of the plan that would cancel existing stock, according to the company’s management team.
"The successful completion of the solicitation process and today's filing represent the next step forward in our financial restructuring," Chief Executive Officer Jerry Winchester told reporters, adding that the company’s suppliers would be paid their balance in full and that operational contracts would still be in place.
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Customers and vendors would not be affected either, according to previously released package details.
Documents from the U.S. Bankruptcy Court in Wilmington, Delaware, stated that SSEI had a total of $1.7 billion in assets and $1.8 billion in debts as of April 30th. A loan of $100 million will fund operating costs for the time being, it stated.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…