Encana Oil & Gas (USA) and Vanguard Natural Resources’ ad hoc equity committee filed with the U.S. Bankruptcy Court separate objections to Vanguard Natural Resources’ Disclosure Statement related to the Company’s Amended Joint Chapter 11 Plan of Reorganization.
The ad hoc equity committee asserts, “As a threshold matter, the Amended Plan is premised on an exceedingly low valuation, not borne of expert assessment of the value of the Debtors’ business or the value of the Debtors’ assets; rather, it was borne of a one-sided negotiation with a subset of the senior unsecured bondholders, as clearly admitted to by the Debtors’ Chief Financial Officer, Richard Robert, when he testified at his May 10, 2017 deposition….The hearing on the New Disclosure Statement should be continued so as to allow for an evidentiary valuation hearing, which was requested by the Equity Committee on April 24, 2017.”
In addition, “Why this Amended Plan is not confirmable squarely rests on the Debtors’ valuation. The Equity Committee engaged Huron Consulting to evaluate these same assets, and Huron determined that the Debtors’ value is between $2.1 billion and $2.6 billion, with a midpoint of $2.35 billion. With such dramatic differences in valuations, and even with the dramatic changes in the Debtors’ own statements as to valuation, this Court should and must determine the appropriate value before the New Disclosure Statement can be considered and before the Debtors waste estate resources to solicit a patently un-confirmable plan.”
The objection continues, “In addition to the high debt ratio, the Debtors’ new business plan cuts, not only production, but capital expenditures as well by approximately 35% over four years. The Debtors are in effect pushing out or delaying production. These reductions negatively impact EBITDA and the present value of cash flows, which artificially depresses the value of the Debtors. These cuts also deplete the very same reserves that support the borrowing base for the Debtors and the financial projection contained in the New Disclosure Statement appears to rely on an assumption based on a constant $850 million borrowing base (despite the Amended Plan only contemplating a 12-month redetermination holiday). If the Debtors adhere to this new business plan of limiting new development, that will result in a negative impact on the size of the borrowing base.”
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