HighPoint Resources Corporation HPR announced that it filed for bankruptcy protection, with the intent that a speedy recovery from financial difficulties will help seal the previously-announced merger deal with Bonanza Creek Energy Inc BCEI.
The company filed a Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware to restructure its debts and obligations, and keep the merger-deal alive. Notably, HighPoint estimated its liabilities to be around $1 billion.
Last November, HighPoint and Bonanza Creek reached an agreement of consolidation in a $376-million deal. The agreement involved merging of the two companies in the Denver-Julesburg (“DJ”) Basin to form a new entity as well as combine their property and production.
HighPoint declared Chapter 11 bankruptcy protection, following the approval of the companies’ shareholders to merge as part of a pre-packaged debt restructuring agreement. Notably, the bankruptcy plan and the merger deal with Bonanza Creek involve $625 million in unsecured debt in exchange for shares in the combined company.
Most importantly, if the restructuring plan goes well, HighPoint shareholders will own 30.4% of the merged company’s stock and up to $100 million in senior unsecured notes issued by the combined company.
Both companies will have an interest in the DJ Basin acreage, with a day-to-day production capacity of 50,000 barrels of oil, liquids and natural gas equivalents per day. The merged entity will be able to generate a free cash flow of approximately $340 million through 2023 to pay off debt and return to shareholders through dividends or share repurchases.
On its part, the transaction will initiate a premier DJ Basin player with a peer-leading expenditure pattern and a sizable rural footprint. The deal also offers HighPoint shareholders the opportunity to engage in a larger DJ Basin producer with an attractive balance sheet as well as a free cash flow profile.
Headquartered in Denver, CO, HighPoint is an exploration and production company, which focuses on the development of oil and natural gas assets primarily in the Denver-Julesburg Basin of Colorado.
HighPoint currently carries a Zack Rank #2 (Buy).
Some other top-ranked players in the energy space are Chevron Corporation CVX and Exxon Mobil Corporation XOM, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron’s earnings for 2021 are expected to rise 15.6% year over year.
Exxon’s earnings for 2021 are expected to increase 19.3% year over year.
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