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Warren Resources Chapter 11 Petition Filed

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Warren Resources and five affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 16-32760. The Company, which is engaged in the exploration, production and development of domestic onshore crude oil and natural gas reserves, is represented by Timothy Alvin Davidson II of Andrews Kurth.

Last month, Warren Resources’ board named James A. Watt as the Company’s chief restructuring officer, to serve in that position in addition to his other positions as president and C.E.O.

According to documents filed with the Court, “The Debtors negotiated with its constituents, both globally and unilaterally, for several months over various options for a consensual restructuring. These discussions resulted in an agreement in principal among Debtors, Plan Sponsor and Ad Hoc Committee for a comprehensive balance sheet restructuring through a chapter 11 plan that includes consensual use of the Prepetition First Lien Lenders’ cash collateral and agreement from the Plan Sponsor to provide debtor-in-possession financing up to $20 million. The agreement is memorialized by the restructuring support agreement [RSA].”

Among other things, the RSA provides for the following: Conversion of the claims of the pre-petition first lien lenders into 82.5% of the equity (subject to dilution by the management incentive plan) in the reorganized debtors and a new first lien secured term exit facility not to exceed $130 million plus, at the plan sponsor’s option, the amount outstanding under the D.I.P. facility; conversion of the claims of the pre-petition second lien lenders (Claren Road), holders of the senior notes and the claim of Citrus Energy into the remaining 17.5% of the equity (subject to dilution by the management incentive plan) in the reorganized debtors, pro rata based on the amount of their respective claims; other general unsecured creditors will receive a discounted cash payment or notes equal to the economic value of the equity being provided to the pre-petition second lien lenders, holders of senior notes and Citrus Energy; existing equity in Warren Resources will be cancelled and receive no further payments or recovery.

Warren Resources explains, “With the precipitous drop in oil and gas prices significantly reducing the Company’s revenues, the Company is no longer able to service its debt obligations and meet operational expenses, let alone further develop it assets, without a financial restructuring.”

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