Milagro Exploration, LLC Files For Bankruptcy in Delaware

On July 15, 2015 (the “Petition Date”), Milagro Exploration, LLC, Milagro Holdings, LLC and certain of their subsidiaries and/or affiliates (collectively, the “Debtors”) filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.According to the declaration of Scott W. Winn, the Debtors’ Chief Restructuring Officer (such declaration being the “Winn Declaration”), the Debtors primarily engage in the acquisition, exploration, and development of oil and gas properties along the onshore Gulf Coast area, primarily in Texas, Louisiana and Mississippi.  The Debtors also own certain non-operating working interests on the Outer Continental Shelf.  The Debtors’ assets include interests in approximately 183,331 net acres, 1,186 wells (of which 797 are operated by Milagro Exploration, LLC), and net proved natural gas reserves of 81,422 MMcf and net proved oil reserves of 14,609 MMBbl. As of March 31, 2015, the book value of the Debtors’ total assets was approximately $390 million. Winn Declaration at 5-6 and at 8.The Debtors’ indebtedness includes approximately $87.6 million in first lien, senior secured principal indebtedness to certain Prepetition First Lien Lenders (as defined in the Winn Declaration).  The Debtors also owe approximately $311.3 million on account of certain Prepetition Second Lien Notes (as defined and further described in the Winn Declaration). As of March 31, 2015, the book value of the Debtors’ total liabilities was approximately $468 million. Winn Declaration at 6 and at 10-11.As part of the Debtors’ first day pleadings, the Debtors are seeking to assume (by the Debtors’ “Motion to Assume”) a Restructuring Support Agreement (“RSA”) whereby the Debtors have agreed to support a restructuring plan based on a $120 million cash contribution plus an equity contribution (with such equity having an agreed value of approximately $97 million) by White Oak Resources VI, LLC (“White Oak”).  In exchange for such contribution, White Oak would receive substantially all of the Debtors’ oil and gas assets.  The RSA and proposed plan contemplate that the claims of the proposed DIP facility, Prepetition First Lien Lenders and the Prepetition First Lien Agent would be paid in full. The RSA and proposed plan also contemplate issuance of equity interests in the reorganized company to holders of the Prepetition Second Lien Notes and a rights offering to certain holders of the Prepetition Second Lien Notes.  The RSA and proposed plan contemplate that the Debtors’ general unsecured creditors will receive no distribution on account of their claims.  Winn Declaration at 3-4.The Debtors are seeking to have their bankruptcy cases jointly administered under the lead bankruptcy case of In re Milagro Holdings, LLC [Case No. 15-11520].  The Debtors’ bankruptcy cases have been assigned to Bankruptcy Judge Kevin Gross.A copy of the Winn Declaration can be accessed here: Download Winn Declaration. A copy of the Debtors’ Motion to Assume and the RSA can be accessed here: Download Motion to Assume. For further information, please contact a Thompson & Knight Bankruptcy and Restructuring Attorney.  For more information on the Thompson & Knight’s Bankruptcy and Restructuring Practice, please visit www.tklaw.com/bankruptcy-and-restructuring/.