Ursa Piceance Holdings LLC – Court Approves $60mn Sale of Debtors’ Assets to Terra Energy Partners

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November 23, 2020 – The Court hearing the Ursa Piceance Holdings cases issued an order approving the $60.0mn sale of substantially all of the Debtors' assets to Terra Energy Partners LLC (the “Purchaser”) [Docket No. 265]. The Terra Energy Partners APA is attached to the order as Exhibit A.

Terra Energy was founded in early 2015; and in early 2016 partnered with Kayne Anderson and Warburg Pincus to acquire the WPX Energy Piceance Basin assets in Colorado for $910 million. Terra currently produces over 500 MMcfe per day of natural gas and associated liquids and is one of the largest producer of natural gas in Colorado and one of the largest privately-held natural gas producers in the United States.

Key Terms of the Terra Energy Asset Purchase Agreement:

  • Seller: Ursa Piceance LLC, Ursa Piceance Pipeline LLC, Ursa Operating Company LLC and Ursa Piceance Holdings LLC
  • Purchaser: Terra Energy Partners LLC
  • Purchase Price: The purchase price for the Assets is $60.0mn cash (the “Unadjusted Purchase Price”). Adjustments to the Purchase Price (including an upward adjustment of $33.29 per barrel for stored merchantable hydrocarbons) are outlined in Section 3.4 of the APA.

Further Background 

[As previously reported] September 29, 2020 – The Court hearing the Ursa Piceance Holdings cases issued an order (i) approving bidding procedures in respect of a possible asset sale and (ii) scheduling an auction/sale timetable culminating in a November 6th auction and a November 12th sale hearing [Docket No. 124].

It is not entirely clear where the Debtors currently stand in respect of their asset sale efforts. At filing on September 2nd, the Debtors gave mixed messages; noting in their bidding procedures motion that their lengthy prepetition marketing efforts had been a failure (in respect of both possible out-of-Court and in-Court sales) but also that a number of the more than 50 parties contacted since they re-booted their marketing efforts (efforts had been halted in the hope that the impact of COVID-19 on marketing prospects would be short-lived) in mid-August "are either currently engaged in the process of executing non-disclosure agreements (‘NDAs’) with the Debtors or have already executed an NDA."

What is clear is that the Debtors are proceeding without a stalking horse and that time is running out to find one (and/or any other prospective bidders) in advance of a November 2nd bid deadline and a November 6th auction. Absent a sale, the Debtors and their first lien lenders are committed to toggling to an equitization plan (NB: Any credit bid submitted "shall be consummated through the equitization provisions of the chapter 11 plan").

The bidding procedures motion [Docket No. 29] states, “Implementing a sale process for the Debtors’ assets is a crucial component of these chapter 11 cases (the ‘Chapter 11 Cases’). It represents a final attempt, after several years of commodity price pressure and more than a year of marketing efforts that failed to produce an acceptable stalking horse, to find a buyer for the Debtors’ assets and to close a sale promptly thereafter. The Debtors have been in payment default under their secured debt facilities since March 2019 and have exhausted all available options to implement an out of court transaction. After careful consideration with their advisors and input from their first lien lenders, the Debtors have determined that an in-court sale process is the best path for exploring value maximization for their stakeholders. The Debtors’ first lien lenders have agreed to provide DIP financing to facilitate this sale process and have committed to provide financing for an equitization plan in the event the auction does not produce an acceptable third party bid.

Breakup Fee and Expense Reimbursement: The approved bid procedures contemplate a 2.5% Break-Up Fee and a $350k expense Reimbursement for any party serves as a stalking horse and whose stalking horse bid is ultimately bettered by a third party bidder. 

Prepetition Marketing Efforts

As further described in the Bonebrake Declaration [Docket No. 32]: "In January 2019, the Debtors engaged Lazard Frères & Co LLC (‘Lazard’) to evaluate strategic alternatives, and assess conducting a sale process, whether in-court or out-of-court. As part of the ultimate sale process, in early 2019, Lazard contacted more than 35 potential purchasers regarding the sale of the Debtors’ assets, which resulted in the Debtors executing confidentiality agreements with over 15 interested parties. After conducting preliminary diligence, the Debtors received several initial indications of interest in March 2019, which the Debtors reviewed with their advisors before proceeding with a second round process to allow bidders to conduct further diligence and to refine proposals. In May 2019, the Debtors received multiple second-round proposals. While the Debtors continued to engage with several parties to further improve and refine proposals, the Debtors and their advisors also allowed additional parties who inquired about the assets to participate in the process. The Debtors continued to engage with multiple parties during the second half of 2019 prior to exclusively negotiating with one potential purchaser through early 2020 to serve as a stalking horse in the chapter 11 sale process. Unfortunately, an agreement ultimately was not reached with that party. The Debtors and the first lien lenders began to discuss pursuing a final in-court sale process without a stalking horse, while reserving ability to toggle to an equitization plan in the event the sale process was not successful.

Shortly thereafter, the COVID-19 pandemic and its associated impact on commodity prices and the broader economy led the Debtors, in consultation with their first lien lenders, to pause marketing efforts and defer commencement of these Chapter 11 Cases in the hope that market conditions would improve. In the interim period the Debtors continued to entertain inquiries and also explored options to sell less than all of the Debtors’ assets.

In July 2020, the Debtors, in consultation with their first lien lenders, made the decision to restart the sale process with the aim of completing it in the chapter 11 proceedings and consummating a 363 sale. As was contemplated earlier in the year, the first lien lenders are reserving the option to toggle to a debt-to-equity plan of reorganization after assessing third-party bids. The Debtors, with the assistance of Lazard, re-engaged with bidders in mid-August once a filing date and timeline for the sale process were solidified. As of this date, the Debtors, with the assistance of Lazard, engaged with (or in some cases, re-engaged) more than 50 potential buyers for the Debtors’ assets. A number of those parties are either currently engaged in the process of executing non-disclosure agreements (‘NDAs’) with the Debtors or have already executed an NDA and have been granted access to a virtual data room in order to conduct diligence in anticipation of a potential bid for the Debtors’ assets. 

 After obtaining this Court’s approval of the Bidding Procedures and an order scheduling an auction and sale hearing, the Debtors will advance toward final approval and consummation of the sale process and, ultimately, completion of a liquidation and wind down pursuant to a chapter 11 plan of liquidation.”

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Chronister Declaration”), Jamie Chronister, the Debtors’ Chief Restructuring Officer, chronicles the events leading to Ursa’s Chapter 11 filing. For these Debtors. like many others, the slide into bankruptcy was predicated by depressed commodity prices and an over-supply of natural gas (in 2012, the Debtors "bought heavily gas weighted assets"). Adding to a mix of challenges that ultimately resulted in a borrowing base reduction were: drilling failures, the 2019 changes in Colorado's regulatory regime, "albatross" contractual arrangement and, of course, COVID-19. The Debtors clearly signal that it is the "burdensome long-term contracts entered into during a dramatically different market environment [and that] created an albatross that was too much to endure," that will be central to this bankruptcy process and any going concern sale aspirations they harbor. In particular several transportation contracts (certain of which were never even used) that the Debtors unsuccessfully attempted to modify prepetition and which are now the subject of litigation. As discussed further below under "Marketing Efforts," those contracts were the blocker as to an out-of-court restructuring or asset sale: "Through the marketing process, the Debtors and their advisors determined that an out-of-court sale likely was not achievable due to the fact that bidders disfavored the financial burdens on the Company created by the WIC TSA and the Ruby TSA, and potential buyers wanted to purchase the assets free and clear of such contracts and related liabilities."

The Chronister Declaration provides: “Like similar companies in this industry, the Company’s natural gas and oil operations, including their exploration, drilling, and production operations, are usually capital-intensive activities that require ongoing access to cash. In December 2012, the Company bought heavily gas weighted assets. Henry Hub natural gas prices moved unpredictably from over $5.00 per mmbtu in 2014 to nearly $2.00 per mmbtu for the past twelve months, and to about $2.50 per mmbtu today. Alongside the fluctuation in commodity prices, the Company also encountered both successes and failures in their drilling program. Following drilling results that were less than internal and third-party audited expectations coupled with depressed prices, the first lien lenders reduced the Company’s borrowing base, thereby reducing liquidity and the Company’s ability to drill more wells. Things were only made more complicated by the change in Colorado’s regulatory environment in 2019 that restricted oil and gas operations.

In addition to long-term pricing declines due to the development of large gas basins such as the Marcellus and Utica (as well as from the massive production of ‘associated gas’ from oil development in basins such as the Permian), gas prices have been challenged by an abundance of supply. Moreover, the initial spread of COVID-19 caused decreased factory output, electricity usage, and transportation, resulting in a decline in commodity demand and further strains on commodity pricing.”

it gets worse. The Chronister Declaration continues: "Eventually, liquidity shortfalls and declining cash flows caused defaults of the Debtors’ leverage covenants. The Company’s Prepetition RBL Credit Facility matured in December 2019 and a going concern opinion was issued on April 3, 2019. Furthermore, burdensome long-term contracts entered into during a dramatically different market environment created an albatross that was too much to endure and decreased the prospect of avoiding these bankruptcy filings. Most significantly, the Debtors had expensive obligations under certain agreements for pipeline transportation that the Debtors did not even use. The Debtors’ prolonged attempts to negotiate a termination or substantial modifications to the long-term interstate transportation agreements bore no fruit and litigation was filed around two transportation agreements…"

Prepetition Indebtedness

The following is an overview of the Debtors' indebtedness as of the Petition date:


Amount ($mm)

Interest Rate


Prepetition RBL Credit Facility

$224.9 mm


December 2019

Prepetition Second Lien Credit Facility

$57.8 mm


July 2020

Total Secured Debt

$282.7 mm



The Prepetition RBL Credit Facility matured on December 31, 2019, and at that time, the borrowing base was set at $220.0mnn. As of the Petition date, the Debtors owed an aggregate principal amount of approximately $209.0mn, plus due and unpaid interest in the amount of $15.9mn, plus any additional fees, interest, and expenses. 

The Prepetition Second Lien Credit Facility’s term loan matured on July 21, 2020. As of the Petition Date, the applicable Debtors owed an aggregate principal amount of approximately $50.0mn, plus due and unpaid interest in the amount of $7.8mn, plus any additional fees, interest, and expenses.

About the Debtors

According to the Debtors: "Ursa is an exploration and production company backed by a private equity commitment from Denham Capital. Ursa is focused on developing oil rich unconventional plays as well as the acquisition of conventional oil and gas producing properties. Ursa is actively leasing in several prospective hydrocarbon provinces.

The Principals at Ursa Resources Group II LLC have operated properties in a number of onshore basins across the United States. We are intimately familiar with operations along the Gulf Coast Texas, the Permian Basin of Texas and New Mexico, the Arkoma Basin of Arkansas, as well as the Williston Basin of North Dakota and Montana.

Ursa management has a wealth of experience with the development of unconventional reservoirs. Most recently the Principals managed Ursa Resources Group LLC, a successful 'Bakken Shale Play' production company. We have spent many years determining what makes for successful resource development in shale gas reservoirs and have completed extensive field studies of the 'Eagle Ford Shale Play,' the 'Bakken Shale Play,' the 'Barnett Shale Play', and the 'Marcellus Shale Play.' Additionally, we have completed studies of several tight conventional reservoirs that hold potential for development utilizing technology pioneered in the shale plays.

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