Case Study

Rosehill Resources, Inc.

CLIENT: Rosehill Resources, Inc.

Seaport Gordian worked on behalf of the majority shareholder to negotiate for the retention of a substantial equity position in a restructured and materially delevered Company.

Situation

In early 2020 the Company was in a serious bind after a large acquisition in 2017 failed to meet expectations, liquidity began to dry up and it received a “substantial doubt about ability to continue as a going concern” opinion as part of its 2019 year-end audit.  SGE was hired by the Company’s majority shareholder ( “Client”) to advise on various strategic options with respect to dealing with the Company’s creditors in the face of a capital structure and liquidity crisis.

As commodity market conditions deteriorated in the first quarter of 2020, the process quickly shifted to a contentious one as the parties could not agree on the terms of a consensual restructuring, leading to the possibility of a Chapter 11 bankruptcy adverse to the Client in which it could have been wiped out.

Engagement

The majority owner of a public company (Rosehill Resources, Inc.) that is an independent oil and natural gas producer with a focus on the acquisition, exploration, development, and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin.  At the time of Seaport Gordian’s engagement (“SGE”), the Company had more than 60,000 MBOE of proved reserves and was listed on the Nasdaq exchange under the ticker ROSE.

Outcome

SGE shepherded the majority shareholder through an unpredictable and contentious restructuring process in which Old Equity was deeply underwater in the capital structure. Together with the client and legal counsel (McDermott Will & Emery), SGE was able to develop and implement a strategy that created negotiating leverage with the Company’s creditors, including an offensive strategy that used new money and credible valuation views.  Through exhaustive recovery analysis and intense negotiations with the Company’s creditor constituencies, SGE was able to help negotiate a structure in which the Client retained a meaningful equity position in a reorganized and materially delevered Company.