The ABI Asset Sale Committee awarded the inaugural Asset Sale of the Year Award to the asset sale in the Cobalt Energy case.[1] Cobalt International Energy Inc. and certain of its subsidiaries (collectively, “Cobalt”) closed five separate sales for substantially all of their assets in the deep-water Gulf of Mexico for aggregate purchase prices of approximately $577 million, all effectuated under a confirmed and consummated chapter 11 plan less than four months after commencing the chapter 11 cases.[2]
These sales — to buyers based around the world from Israel to France to Norway — were the completion of a comprehensive restructuring and sale process that began 13 months earlier, in March 2017, and included a December 2017 settlement with the state oil company of the Republic of Angola that divested Cobalt of its offshore Angola assets and generated an additional $500 million in proceeds.
Cobalt was an independent offshore exploration and production company with significant assets in the deep-water U.S. Gulf of Mexico and offshore West Africa. At the time of filing, Cobalt was the operator of North Platte and held a non-operating working interest in Shenandoah, Anchor and Heidelberg. Heidelberg began initial production in January 2016 (and was Cobalt’s only producing asset), while North Platte, Shenandoah and Anchor were fully appraised and in pre-development at the time of the filing. Beginning as early as 2015, Cobalt began a strategic review of its portfolio. As a result of the review, Cobalt decided to sell its Angola assets. This proposed sale was ultimately unsuccessful following the termination of the sale by the state oil company of the Republic of Angola. Following the failed Angola sale and initial marketing of select Gulf of Mexico assets, Cobalt determined to pursue a sale of all of its assets.
Cobalt and the buyers faced incredible pressure to complete the sales in time to complete a unit-saving drilling operation at the valuable North Platte discovery or obtain a suspension of production from government agencies before June 2018. Failure could have terminated the leases and seen the assets’ value drop to zero. Ultimately, on Dec. 14, 2017, Cobalt filed for chapter 11 before Hon. Marvin Isgur of the U.S. Bankruptcy Court for the Southern District of Texas with approximately $2.8 billion of funded indebtedness and approximately $450 million in cash.
On the petition date, Cobalt filed a bid procedures and scheduling motion requesting important dates and deadlines to allow for an expedited sale and plan process, and worked expeditiously to garner support from all key stakeholders to the required, speedy sale timeline. On March 6, 2018, Cobalt held an auction for all or substantially all of its assets. The auction — conducted in consultation and coordination with all key stakeholders — concluded with four successful buyers for the five separate asset packages. On April 5, 2018, the bankruptcy court entered an order confirming the chapter 11 plan and approving the sales. The sales closed, and the plan went effective on April 10, 2018, less than four months after the petition date and sufficiently in advance of the regulatory deadlines to maintain the assets’ value. Cobalt’s chapter 11 cases represent one of the fastest chapter 11 restructurings completed without the benefit of a prepackaged or prearranged chapter 11 plan agreed on the petition date, and represent a skillful and successful collaboration by the Cobalt debtors (including the management team and board of directors), their creditors, and professionals across the entire capital structure.
The Cobalt debtors were represented by Kirkland & Ellis LLP, including James H.M. Sprayregen, Marc Kieselstein, Chad J. Husnick, Brad Weiland, Laura Krucks and Gabor Balassa, and by Zack A. Clement PLLC. An ad hoc group of first-lien noteholders was represented by Weil, Gotshal & Manges LLP, including Matt Barr, Alfredo R. Perez and Chris Lopez. An ad hoc group of second-lien noteholders was represented by Akin Gump Strauss Hauer & Feld LLP, including James Savin, Kate Doorley and Marty L. Brimmage, Jr. The official creditors’ committee was represented by Robert J. Feinstein, Ira D. Kharasch and Jeffrey N. Pomerantz of Pachulski Stang Ziehl & Jones LLP. Jones Walker, LLP served as buyers counsel with respect to the Shenandoah assets. The team from Jones Walker LLP included Rudolph R. Ramelli, Elizabeth J. Futrell, Christopher M. Capitelli, and Joseph E. Bain.
[1] 17-36709 TXSB.
[2] Anchor discovery: sold to Total E&P USA, Inc. for approximately $180 million;
- Heidelberg discovery: sold to W&T Offshore, Inc. for approximately $30 million;
- North Platte discovery: sold to Total E&P USA, Inc. and Statoil Gulf of Mexico LLC (now known as Equinor) for approximately $340 million;
- Shenandoah discovery: sold to Navitas Petroleum US, LLC for approximately $2 million; and
- certain additional exploration assets: sold to Total E&P USA, Inc. for approximately $25 million.