Trans Energy

Situation

Trans Energy, Inc. was a publicly-traded, pure-play Marcellus Shale producer engaged in the acquisition, exploration, development, and production of oil and natural gas in West Virginia.  The Company and its JV Partner, Republic Energy, owned interests in and operated approximately 62,000 gross acres across Marion, Wetzel, and Marshall counties in West Virginia.

The Company faced several challenges over a two year period as a result of volatility in the energy markets, which affected profitability and resulted in a lack of liquidity that had implications on both the development of its reserves and servicing of its debt obligations. Specifically, TENG’s revenues were cut in half and its stock price dramatically decreased from $3.00 to $0.60 share over the course of a year. The Company was also served with a Notice of Default from its primary secured creditor, who was owed in excess of $100 million (implying a Debt/EBITDA ratio of approximately 15x).

Engagement

Gordian was originally retained to provide the Company and its Board with investment banking and financial advisory services aimed at preserving and maximizing shareholder value.  With the stock languishing at less than a dollar throughout our 18-month engagement, and with Trans Energy insolvent and in continuous default on its senior secured credit facility, Gordian focused on keeping creditors at bay while hoping the market would turn.

After months of negotiations with the Company’s secured lender, Gordian was successful in not only keeping them at bay, but also wresting a discount from the senior secured creditor – including negotiating for shareholders to both leapfrog higher in the valuation waterfall by making its recoveries pari-passu with more than 40% of the senior secured debt and obtaining a discount on the debt if a sale could be effected near term.

Outcome

Soon thereafter, following the orchestration by Gordian and the Company of a “bake-off” amongst competing interested bidders, the Company announced – at a time when the thinly-traded stock was $1 – a merger with Pittsburgh-based EQT Corporation (NYSE: EQT) at $3.58 per share, or an unprecedented premium of in excess of 250%.  The aggregate consideration was in excess of $200 million, at a time when the market cap before the transaction was announced was but $16 million.  The transaction closed in December 2016.