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Gulfport Files for Chapter 11 Bankruptcy Amid Coronavirus

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Gulfport Energy Corporation recently announced that it has filed for Chapter 11 bankruptcy protection at the United States Bankruptcy Court for the Southern District of Texas after coronavirus-induced commodity price crash dried up the available capital in the energy industry. The company filed for Chapter 11 with an intention to improve its financial position and significantly lower its debt.

Management of this currently Zacks Rank #3 (Hold) company felt that the bankruptcy protection route will be the best option for the stock’s turnaround. Under the Chapter 11 security, the company will be able to reduce its funded debt by $1.25 billion and save its cash and annual expense. Under the restructuring agreement, the company plans to issue $550 million of new senior unsecured notes to the existing unsecured creditors of certain Gulfport subsidiarieswhile safeguarding the interests of its shareholders as its balance sheet is realigned to fit the present demand scenario. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further, this natural gas explorer and producerobtained $262.5 million in debtor-in-possession financing from Gulfport’s present lenders under its revolving credit facility. This also comprises $105 million in new money that can be achieved upon the court’s consent. This, in turn, will help the company finance its ordinary business activities at the time of the chapter 11 proceedings, consisting of employee salaries and perks and the bills owed to suppliers and vendors. Also, Gulfport’s existing lenders assured to provide $580 million in exit financing to the company after coming out of Chapter 11. Kirkland & Ellis LLP, Jackson Walker and Alvarez & Marsal were Gulfport’s financial, legal and restructuring advisors.

Investors should know that Gulfport is not the first energy explorer to seek bankruptcy protection due to the effects of the pandemic. Previously, upstream oil and gas companies, such as Oasis Petroleum Inc. and Chesapeake Energy filed for Chapter 11 bankruptcy protection, unable to cope with the historic plunge in commodity prices due to coronavirus.

Earlier this year, another energy player Whiting Petroleum Corporation (WLL - Free Report) emerged from bankruptcy and its ownership was made available to the public on the New York Stock Exchange. The company also completed its financial streamlining, thereby minimizing its funded debt by about $3 billion. Whiting Petroleum filed for Chapter 11 bankruptcy on Apr 1, 2020, and finally overcame its crisis through a strenuous reorganizing process on Sep 1. The entity was the first publicly traded shale producer to file for bankruptcy after the sharp decline in crude prices during March.

About Gulfport

Founded in 1997, Oklahoma City, OK-based Gulfport is engaged in the acquisition, exploration, development and production of oil and natural gas properties in the United States. The company's asset base — primarily focused on natural gas — is concentrated in the Utica Shale of Ohio and the SCOOP play in Oklahoma. Gulfport has a combined inventory in excess of 3,000 gross drilling locations in its two primary plays.

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