November 8, 2021 – The Debtors filed a First Amended Plan of Reorganization and a related Disclosure Statement [Docket Nos. 273 and 272, respectively], and separately filed redlines of each document showing changes to the versions filed on October 1, 2021 [Docket No. 277]. The revised documents have been largely amended to reflect a shift to a dual path strategy through the addition of a possible "Stand-Alone Restructuring."

On September 17, 2021, Tenrgys, LLC and 33 affiliated Debtors (“Tenrgys” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Mississippi, lead case number 21-01515. At filing, the Debtors’ lead petition noted estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn.

At filing, the Debtors pointed the finger squarely at creditor PanAm, owned by National Beverage founder Nick Caporella, which had acquired outstanding debt under the Debtors' "2012 RBL Facility" (with a view to converting that debt into equity in the Debtors' Colombian assets) in April 2019 before that relationship dramatically soured with the Debtors now accusing PanAm of seeking "unilateral control over all of the Debtors’ business —international and domestic…" Please see our Petition date coverage for more on the realtionship with PanAm.

Overview of Plan

The amended Disclosure Statement [Docket No. 272 with additions in blue bold] notes, “The Plan provides for the reorganization of the Debtors as a going concern and will significantly reduce the Reorganized Debtors’ long-term debt and annual interest payments, resulting in a stronger, de-levered balance sheet for the Reorganized Debtors… [T]he Plan provides for: 

1. the satisfaction of the Secured 2012 RBL Facility Claim either through the Colombian Collateral Tender Transaction or the Stand-Alone Restructuring;
2. the partial equitization and restructuring of the 2013 Loan Claim;
3. payment in full of Allowed General Unsecured Claims on the Effective Date or otherwise in the ordinary course of the Debtors’ business; and
4. Exit Financing of up to $5 million on the Effective Date to ensure liquidity and assist in commencing payments under the Plan.”

Drilling down, the Disclosure Statement continues: "A. Treatment of the Allowed Secured 2012 RBL Facility Claim. Allowed Secured 2012 RBL Facility Claim shall be treated as described in Section IV.A.1 of this Disclosure Statement, entitled ‘The Colombian Collateral Tender Transaction,’ unless the Debtors elect prior to the Confirmation Date (such election to be made with the reasonable consent of the Consenting 2013 Loan Lender) to implement the Stand-Alone Restructuring described in Section IV.A.2 of this Disclosure Statement.

1. The Colombian Collateral Tender Transaction. As partial security for the Debtors’ indebtedness under the 2012 RBL Facility, PanAm holds security interests in 100% of the LLC membership interests of Telpico, which owns the Colombian Assets. Attached hereto as Exhibit ‘H’ and incorporated herein by reference is a
supplemental Colombian Assets Disclosure Schedule specifically concerning the Colombian Assets.

In general, and as set forth in more detail in the Colombian Assets Disclosure Schedule, Telpico and its former partners have spent over $100 million performing seismic surveys, conducting geologic reviews, preparing environmental studies, doing mandated social work in local communities, obtaining permits, and routinely obtaining term extensions of the underlying exploration and production contracts to maintain the Colombian Assets. The Llanos 42 and VSM 22 concessions are now ‘drill ready.’ The environmental review required for the VSM 3 concession was recently approved by ANLA, the government agency having jurisdiction over oil and gas exploration, paving the way for the routine issuance of a permit for drilling the initial VSM 3 prospect.

The Debtors engaged Moyes & Co. (‘Moyes’), which has valued the Colombian Assets between approximately $97,200,000 and $121,200,000 as of August 1, 2021. Additionally, in May 2019, PanAm obtained a geologic and engineering evaluation of the Colombian Assets that was prepared without the knowledge or involvement of the Debtors. at assessment assigns a 'net present value' to Telpico’s interest in the Colombian Assets of over $3 billion in the ‘base case’ or ‘expected scenario,’ with a ‘potential upside’ value of more than $9.6 billion.

If the Colombian Collateral Tender Transaction is confirmed, on the Effective Date, the Debtors shall convey to PanAm all of the Debtors’ right, title, and interest in and to Telpico and the Colombian Assets in full and complete satisfaction of PanAm’s Secured Claim under Section 1129(b)(2)(A)(iii) of the Bankruptcy Code.

2. The Stand-Alone Restructuring. If the Debtors elect (with the reasonable consent of the Consenting 2013 Loan Lender) not to pursue the Colombian Collateral Tender Transaction, then the Allowed Secured 2012 RBL Facility Claim will be repaid in full over a five-year period in deferred cash payments with an interest rate of 3.25% per annum (the current federal prime rate) or such other interest rate as the Court may determine. Consistent with section 1129(b)(2)(A)(i) of the Bankruptcy Code, PanAm shall retain its liens until the Allowed Secured 2012 RBL Facility Claim has been fully paid.

B. Treatment of the 2013 Loan Claim. On the Effective Date, the 2013 Loan Claim shall be cancelled, released, and extinguished and will be of no further force and effect, and the Consenting 2013 Loan Lender shall receive, in full and final satisfaction of such Allowed 2013 Loan Claim: (i) Payment of the sum of Five Hundred Thousand Dollars ($500,000.00) in Cash on the Effective Date; (ii) A membership interest equal to ten percent (10.00%) of the equity in the Reorganized Tenrgys; and (iii) (a) If the Colombian Collateral Tender Transaction is consummated, a new $40 million floating rate first-lien term loan with market pricing (but with an interest rate of L+650 with a LIBOR floor of 1% if paid in cash, or L+850 with a LIBOR floor of 1% if paid in kind), and other market terms to be agreed and set forth in New Secured Term Loan Documents, consistent with the provisions set forth in the financing term sheet attached to the RSA, in each case acceptable to the Consenting 2013 Loan Lender in form and substance; or (b) If the Stand-Alone Restructuring is consummated, a new $20 million floating rate second-lien term loan with market pricing (but with an interest rate of L+750 with a LIBOR floor of 1% if paid in cash, or L+950 with a LIBOR floor of 1% if paid in kind), and other market terms to be agreed and set forth in New Secured Term Loan Documents, consistent with the provisions set forth in the financing term sheet attached to the RSA, in each case acceptable to the Consenting 2013 Loan Lender in form and substance."

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement, see changes in blue bold), see liquidation analysis below:

• Class 1 (“Secured 2012 RBL Facility Claim”) is impaired and entitled to vote on the Plan. The aggregate amount of the claim is $71,060,717.80
  (alleged) and expected recovery is 100%. Treatment: The holder shall receive: (a) if the Colombian Collateral Tender Transaction is pursued, the Debtors shall, under section 1129(b)(2)(A)(iii) of the Bankruptcy Code (i) convey, transfer, or otherwise assign all of the Debtors’ right, title, and interest in and to Telpico to the Holder of the Allowed Secured 2012 RBL Facility Claim; or (ii) alternatively, at the option of the Holder, cause Telpico to convey, transfer, or otherwise assign all of Telpico’s right, title, and interest in and to and the Colombian Assets to the Holder of the Allowed Secured 2012 RBL Facility Claim; or (b) if the Stand-Alone Restructuring is pursued, the Debtors shall repay the Allowed Secured 2012 RBL Facility Claim in full over a five-year period in deferred Cash payments at an interest rate of 3.25% per annum…Consistent with section 1129(b)(2)(A)(i) of the Bankruptcy Code, PanAm shall retain its liens until the Allowed Secured 2012 RBL Facility Claim has been fully paid.
• Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 3 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 4 (“Unsecured 2013 Loan Claim”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $114,190,000 and expected recovery is 44%. Treatment: Each holder will receive: (i) Payment of the sum of Five Hundred thousand Dollars ($500,000.00) in Cash; (ii) New Reorganized Tenrgys Membership Interests equal to ten percent (10.00%) of the equity in the Reorganized Tenrgys; and (iii) the New Secured Term Loan, which will be (a) If the Colombian Collateral Tender Transaction is consummated, a new $40 million floating rate first-lien term loan with market pricing (but with an interest rate of L+650 with a LIBOR floor of 1% if paid in cash, or L+850 with a LIBOR floor of 1% if paid in kind), and other market terms to be agreed and set forth in the New Secured Term Loan Documents or (b) if the Stand-Alone Restructuring is pursued , a new $20 million floating rate second-lien term loan with market pricing (but with an interest rate of L+750 with a LIBOR floor of 1% if paid in cash, or L+950 with a LIBOR floor of 1% if paid in kind), and other market terms to be agreed and set forth in the New Secured Term Loan Documents.
• Class 5 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claim is $219,000 and expected recovery is 100%.
• Class 6 (“TOG Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 7 (“Intercompany Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 8 (“Intercompany Interests in the Debtors”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 9 (“Existing Tenrgys Equity Interests”) is impaired and entitled to vote on the Plan. Each Holder will receive or retain such Holder’s Pro Rata share of 100% of the Reorganized Equity Interests, subject to dilution by the Reorganized Equity Interests to be received by the Holder of the 2013 Loan Claim.

Valuation of the Debtors’ Assets

The Disclosure Statement provides: "FTI Consulting, Inc. ('FTI') has valued the Debtors’ domestic oil-and-gas assets, including both oil-and-gas reserves and midstream assets, excluding the Colombian Assets (collectively, the 'Domestic Assets') between approximately $117,300,000 and $163,700,000 as of September 1,
2021. (the 'FTI Valuation'), and together with the Moyes Report, the 'Valuations'). Moyes & Co. ('Moyes') has valued Telpico’s Colombian Assets between approximately $97,200,000 and $121,200,000 as of August 1, 2021."

Key Documents

The Disclosure Statement attached the following exhibits [Docket No. 272]:

• Exhibit A: First Amended Plan of Reorganization 
• Exhibit B: Corporate Organization Chart 
• Exhibit C: Disclosure Statement Order 
• Exhibit D: Liquidation Analysis 
• Exhibit E: Colombian Collateral Tender Transaction Financial Projections 
• Exhibit F: Stand-Alone Restructuring Financial Projections 
• Exhibit G: RSA 
• Exhibit H: Colombian Assets Disclosure Schedule 
• Exhibit I: Moyes Report

About the Debtors

According to the Debtors: “The Debtors operate an independent oil and natural gas business. Headquartered in Ridgeland, Mississippi, as of September 1, 2021, the Debtors had 11 productive fields and fieldwide units in Mississippi and Louisiana.

Debtor Tellus Energy, LLC ('Tellus Energy') and its Debtor subsidiaries Acadiana Mineral Owners, LLC; BAX, LLC; BOE, LLC; Eutaw Ventures, LLC; Jurassic Seismic Company; LASO, LLC; NOMS, LLC; North Cohay, LLC; PCE, LLC; RFND, LLC; RFS, LLC; SNPI, LLC; South Cohay, LLC; STP Ventures, LLC; Tallahala Exploration, LLC; Telpico USA, LLC; TC Energy, LLC; and WCOA, LLC (collectively, the 'Upstream Debtors') are involved in the 'upstream' segment of the oil-and-gas industry, which means that their business includes the exploration, drilling and extraction of oil, minerals and gaseous hydrocarbons, and other activities associated with the initial stages of oil-and-gas production."

Corporate Structure Chart

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