Blackstone’s shale oil venture Gavilan Resources LLC files for Chapter 11 bankruptcy

Late on Friday, Blackstone Group’s Gavilan Resources LLC filed for Chapter 11 bankruptcy citing oil price collapse and a bitter legal battle with a partner.

Formed following the $2.3 billion acquisition of Texas shale oil properties in 2017, Gavilan listed secured debt of more than $550 million in its filing in U.S. Bankruptcy Court in Houston.

According to the filing, Gavilan plans on selling its assets, and has hired investment banker Lazard Freres & Co and has named Weil, Gotshal & Manges as its attorneys and Vinson & Elkins as its bankruptcy advisers.

Global oil prices have crashed by more than 60% this year following a collapse in demand for fuels because of coronavirus related lockdowns; the glut in the global oil market and a competition among the world’s top oil producers is also another reason for the fall in oil prices.

According to the information in the filing, Gavilan filed for bankruptcy follwing an “increasingly unworkable relationship” with its partner Sanchez Energy Corp.

The duo had acquired 155,000 acres in Texas’ Eagle Ford Shale oil field from Anadarko Petroleum.

Blackstone declined comment.

Both companies have been embroiled in a lawsuit over the development and ownership of the properties. This lawsuit is schedule to resume on May 22.

In 2019, Sanchez had filed for Chapter 11 bankruptcy citing low prices and the more than $2 billion in debt. Although its restructuring plan has been confirmed it is not yet effective, said the court filing.

This year, following the collapsing oil prices, debt heavy shale oil producers, including Occidental Petroleum and Chesapeake Energy, have sought to restructure their debts.

Last month, Whiting Petroleum became the largest shale oil company to file for bankruptcy following the coronavirus-led pandemic which saw oil prices plummet.



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