Warren Resources, a small driller that drilled and brought online their first two Marcellus Shale wells last year, is based in Houston and operates in California, Colorado, Wyoming and Pennsylvania. In February MDN told you that Warren missed an important $7.5 million payment, the first ominous signal of what was to come (see Warren Resources Misses $7.5M Debt Payment, 30-Day Clock Ticking). The next week the company announced no new drilling, anywhere, in 2016–hinting they might have to file for bankruptcy (see Warren Resources: Potential Bankruptcy, No Drilling in 2016). In March the New York Stock Exchange threatened to de-list Warren’s stock (see Pretty in Pink? Warren Resources Put on Notice for Stock Delisting). In April, the board changed the definition and role of the company’s CEO to become CRO–Chief Restructuring Officer–a sure sign of what was ahead (see Warren Resources Preps for Bankruptcy, New Role for CEO). Indeed, this one was pretty easy to predict. Last week Warren filed for Chapter 11 bankruptcy protection and has worked out a deal to transfer ownership of the company to two debt-holders: 82.5% of the company will now be owned by GSO Capital (owed $248 million), and the rest will go to Claren Road Asset Management (owed $57 million). Claren isn’t happy with the deal. Current/existing stockholders? They get zip. Wiped out. Screwed. That’s how it works in our great country–debt-holders get to take over and equity-holders (i.e. owners) get taken to the cleaners…
