Shares of Bonanza Creek Energy were battered Wednesday after the Denver oil and gas producer disclosed it had hired a financial adviser to help it explore alternatives, including a restructuring.
Bonanza Creek, in a disclosure filed Wednesday with the U.S. Securities and Exchange Commission, said it had retained Perella Weinberg Partners, a New York firm known for working with companies in a tough spot financially.
Investors didn’t take well to the news. Shares of Bonanza Creek, which closed at $2.28 on Tuesday, plunged to as low as $1.14 before crawling back to end trading Wednesday at $1.44 a share, a 36.8 percent decline.
Shares of the company had traded above $60 in August 2014, a few months before Saudi Arabia said it would no longer limit its production to support prices. That set off a steep descent in oil prices from above $100 a barrel to briefly under $30.
Oil is now back around $45 a barrel. But lenders are reducing the credit they are willing to extend to producers given the lower value of their oil and gas reserves.
Bonanza Creek said in late May that the amount it could borrow under its credit agreement was cut from $475 million to $200 million. That was a problem because the company had borrowed $288 million, leaving it with a deficit of $88 million.
Bonanza Creek, like many petroleum producers, initially turned to the equity markets to help it stay afloat. The company raised more than $200 million in a secondary offering back in February 2015 to investors willing to pay $26 a share.
Asset sales came next. Last November, the company announced it would sell its gathering systems and other i. That provided a temporary boost, but the deal never closed and in .
In February, Bonanza Creek was among a group of Denver producers, along with Bill Barrett Corp., Resolute Energy, SM Energy, Triangle USA Petroleum and Whiting Petroleum, that received
Bonanza Creek is focused primarily on the and to a lesser degree on the Cotton Valley sands of southern Arkansas. It also has the second largest position in Colorado’s more remote North Park Basin, but has put exploration in that area on hold.
Unlike producers who operate primarily outside the state, Bonanza Creek’s struggles come with an added economic impact in Colorado. In March, the company dismissed its chief financial officer and general counsel, part of a larger corporate reorganization that let go of 26 employees and 17 contract workers.
