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Thursday, February 21 , 2019, 2:12 am | Fair 46º


Venoco Declares Bankruptcy to Restructure Debt After Refugio Oil Spill

Low oil prices also cited in Chapter 11 filing that seeks to eliminate $1 billion in debt

Venoco’s Ellwood Onshore Facility has been idled since shortly after the oil pipeline break and spill last May near Refugio State Beach. The company on Friday filed for Chapter 11 bankruptcy protection, seeking to eliminate $1 billion in debt.
Venoco’s Ellwood Onshore Facility has been idled since shortly after the oil pipeline break and spill last May near Refugio State Beach. The company on Friday filed for Chapter 11 bankruptcy protection, seeking to eliminate $1 billion in debt. (Tom Bolton / Noozhawk file photo)

Venoco has filed for bankruptcy to reduce the company’s debt and restructure itself while it deals with the “serious problems” of low oil prices and the closure of Santa Barbara County oil and gas transportation pipelines, which federal regulators shut down after the Refugio Oil Spill.

The company announced the move Friday, the same day it filed a voluntary Chapter 11 bankruptcy petition in court.

Venoco’s Platform Holly, located offshore of Goleta, ceased oil and gas production operations last May, two days after a Plains All American pipeline ruptured and caused a spill on the Gaviota Coast.

Both local Plains pipelines were shut down after the spill, and Venoco is one of three companies that use the pipes to transport oil and gas to refineries.   

Venoco is the Santa Barbara County’s largest taxpayer and most of its assets are oil offshore and onshore in Southern California.  

A month ago, Venoco failed to submit its $13.7-million semi-annual interest payment, saying the move was to give the company more time to figure out the best way to reduce its debt strengthen its financial position.

In a statement, Venoco said restructuring will eliminate about $1 billion in debt and “position the company for long-term success.”

The company has enough liquidity to continue its oil and gas operations in the meantime, according to a statement, and founder Tim Marquez will stay at the helm during the process.

Venoco reached an agreement with senior lenders, including Apollo Investment Corporation, regarding an exchange of debt for ownership shares. 
The company will keep the same management and operations team during the proceedings, and the planned restructuring is anticipated to take several months, spokesperson Mary Ellen Grant said. 

Paperwork was filed in District of Delaware, a common practice regardless of where companies are based. Venoco is based in Denver, Colo. with the majority of personnel based in Carpinteria.

In documents signed by Chief Financial Officer Scott Pinsonnault, Venoco claims $100-500 million in assets and up to $1 billion in liabilities.

Multiple corporations — including Venoco, Inc., TexCal Energy, Whittier Pipeline Corporation and Ellwood Pipeline, Inc. — asked to be administered as a single Chapter 11 case.

Pinsonnault started working with Venoco as an energy restructuring consultant with Opportune in 2014 and later became CFO and chief restructuring officer.

Oil prices dropped nearly 70 percent since 2014 and the company was hard-hit by the Refugio Oil Spill since Platform Holly provided half of the company’s production, according to Pinsonnault.

“Despite having a strong asset base, the Debtors, like many of their industry peers, have struggled this past year to maintain liquidity as a result of the protracted and continuing decline in oil prices and the general dislocation of the energy markets,” Pinsonnault wrote in the court documents.

“Although the Debtors tried to secure additional financing in lieu of commencing these cases, the continued downward trend in oil prices and the state of the industry generally, foreclosed the possibility of raising capital outside of a bankruptcy filing.

“Operational challenges at the Debtors’ South Ellwood Field further negatively impacted liquidity. Specifically, roughly one-half of the Debtors’ daily production from the South Ellwood Field has been shut in since approximately May 22, 2015, as a result of an unrelated, third-party pipeline shut down.”

Venoco, Inc. had 160 employees working out of Carpinteria as of Friday, according to court documents. 

“While we continue to be in a strong cash position, the declining price of oil and the ongoing closure of Plains All American Pipeline 901 continue to be serious problems,” CEO Mark DePuy said in a statement. “With this agreement, Venoco will be in a much stronger position to withstand these challenges and others that may follow.

“Both during and after this process, Venoco will maintain the same commitment to safety, environmental protection and the communities in which we operate. Venoco is and continues to be a remarkable company with award-winning operations, excellent employees, and robust energy-producing assets.”

Noozhawk managing editor Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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