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Debt Restructuring and Refinancing of Oil Field Service Provider

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Home·Debt Restructuring and Refinancing of Oil Field Service Provider

The Situation

Permian Basin Oil Field service provider of acidizing to major oil field developers. Acidizing is a well-maintenance activity to restock well productivity. Annual sales $20 million; down from peak of $70 million. The company had $120 million of secured debt. 

  • EBITDA plummeted from nearly $30 million/year to $2 million/year as oil prices fell from $100 to $30 a barrel.
  • The oil industry price decline had significantly reduced well drilling activity, such that the company’s job volume and pricing levels both plummeted by over 50%.
  • Management did a good job of adjusting the cost structure, allowing the company to remain EBITDA positive.
  • Oil prices were starting to normalize around $50/barrel.
  • The PE firm owner was willing to inject additional capital if lenders would provide a debt restructuring with a multi-year turnaround runway.

How We Advised

Our experts created a valuation based on 3-year forward-looking and industry assumptions that are gradually recovering.

  • Negotiated a consensual debt restructuring that converted secured debt into a performing Tranche A and non-performing Tranche B.
  • New PE capital was injected pari passu with the performance of Tranche A debt, and the lender received minority warrants.
  • Recapitalization was done out of court.
  • The company’s EBITDA has increased to $6 million/year.
  • The company is adequately servicing secured debt.
  • The company has a 3-year runway, which provides an opportunity for the oil industry to recover and for secured lenders to recoup their full investment, as well as for PE firms to recover their pari passu debt and have a longer-term potential for equity recovery.
  • $15 million revolver refinanced.

Key Contact

Dan F. Dooley, CTP 
Senior Managing Director 
Strategic Advisory Practice 
+1 603 660 8952 
[email protected] 

Related Practice Areas

> Debt Restructuring Services 
When a company is in financial distress, our Strategic Advisory experts design and implement debt restructuring and refinancing strategies tailored to the company’s unique circumstances. We help middle-market businesses stabilize operations, improve liquidity, and optimize their capital structures. 

 

> Turnaround and Restructuring Services 
Navigating the many challenges confronting a company in transition requires an operationally focused approach that looks beyond the balance sheet to minimize further degradation and build a path to sustainable growth. Drawing upon decades of experience in the turnaround space, we help companies in transition identify practical strategies to improve profitability and liquidity for immediate relief, while concurrently developing and executing a comprehensive turnaround plan for long-term, sustainable value creation. 

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