(Reuters) - U.S. shale driller Ascent Resources Marcellus Holdings LLC, which filed for Chapter 11 protection on Tuesday, expects to exit bankruptcy by March 31 under the new ownership of its lenders, lawyers for the company and its lenders said in court on Thursday.
The bankruptcy petition by Ascent, one of the companies founded by late U.S. oilman Aubrey McClendon after he left Chesapeake Energy Corp, followed two years of negotiations with lenders to work out a reorganization plan, the lawyers said.
Dozens of North American oil and gas producers began filing for Chapter 11 protection in 2015 after a plunge in commodity prices. Even though prices have since recovered, Oklahoma City, Oklahoma-based Ascent said in court papers that its revenue and production volume still failed to cover expenses and contract commitments.
Under Ascent Resources Marcellus’ consensual reorganization plan, first-lien and second-lien lenders, owed roughly $1 billion total, will swap their debt in exchange for equity. Management also stands to hold shares in the new company.
“It took longer than we had expected but we were ultimately able to reach this agreement” to keep the company operating, Damian Schaible, a lawyer representing a lender steering committee, said at a hearing in U.S. Bankruptcy Court in Wilmington, Delaware.
The bankruptcy is for Ascent’s Marcellus formations, which own development rights on some 43,000 acres in West Virginia, and has no impact on its Utica assets in Ohio, which fall under a separate capital structure, the company said.
Privately owned Ascent’s vendors and service providers will not be impaired by the restructuring, which has the support of a majority of its lenders.
Ascent’s lawyers asked for a confirmation hearing with U.S. Bankruptcy Judge Laurie Silverstein to be held mid-March with a view to exiting Chapter 11 by the end of the month. The company said the deal would reduce debt and position it for future growth.
Ascent Resources Marcellus Holdings is one of several companies launched by U.S. fracking pioneer McClendon after he was ousted from Chesapeake in 2013 during a corporate governance crisis. He was indicted along with other unnamed co-conspirators on federal charges of bid-rigging on March 1, 2016, and died in a single-vehicle collision a day later.
The case is In re Ascent Resources – Marcellus, LLC in U.S. District Court for the District of Delaware, No. 18-10266.
Reporting by Tracy Rucinski in ChicagoEditing by Matthew Lewis