January 4, 2021 – The Debtors filed an Amended Chapter 11 Plan of Reorganization and a related blackline showing immaterial changes to the version of the Plan filed on November 30, 2020 [Docket Nos. 340 and 341]. In anticipation of their January 6, 20121 Plan confirmation hearing, the Debtors have also recently filed (i) their memorandum of law in support of Plan confirmation (the "Memorandum") [Docket No. 343], (ii) Plan voting results [Docket No. 339], (iii) a proposed Plan confirmation order [Docket No. 342] and (iv) a Plan Supplement [Docket No. 330]

On November 19, 2020, the Court approved the $60.0mn sale of the Debtors’ assets to Terra Energy Partners LLC (“Terra Energy” or the “Successful Bidder”). The sale was closed on December 22, 2020, the Debtors’ Plan still allowed them to toggle to a debt equitization transaction with their RBL Lenders. The Disclosure Statement [Docket No. 282] noted, “While the RBL Lenders prefer a successful sale to a third party, they intend to equitize their debt and provide Exit Financing if a successful sale is not achieved.”

Plan Overview 

The Memorandum provides, the following pre-Plan confirmation hearing overview: “The Debtors sought to maximize the recovery for their stakeholders through the Plan, whether or not they were able to successfully consummate the Asset Sale. If an acceptable and value-maximizing sale has not been achieved, under the Debtors’ ‘toggle’ Plan, an equitization of the RBL Lenders would have been triggered. However, the [$60.0mn to Terra Energy Partners LLC] Asset Sale was indeed successful and closed on December 22, 2020, after approval by the Bankruptcy Court. Accordingly, the Debtors filed the Asset Sale Election Notice, triggering the Asset Sale Distribution provisions of the Plan."

The Memorandum notes that there is a single objection left to settle which does not appear to be substantial.

The Disclosure Statement [Docket No. 282] notes, “Through these chapter 11 cases, the Debtors seek to maximize the value of their estates through a sale transaction, confirm and make distributions through a plan of distribution and wind down any remaining affairs. On November 19, 2020, the Court held a hearing and approved an Asset Sale to Terra Energy Partners LLC (“Terra”) [Dkt. No. 265]. The Asset Sale is expected to close on December 22, 2020 or soon thereafter. In the alternative, if the Asset Sale does not close and the Debtors are not otherwise able to achieve an acceptable sale transaction through a 363 sale process, the Debtors intend to pursue a debt equitization transaction with its RBL Lenders. As a result, the Plan includes a toggle feature dependent upon whether a third-party sale or equitization is ultimately determined as the best path for these estates. While the RBL Lenders prefer a successful sale to a third party, they intend to equitize their debt and provide Exit Financing if a successful sale is not achieved.

Whether confirmed and consummated through the debt-for-equity transaction or a sale transaction, the Plan will resolve these Chapter 11 Cases, will wind down the bankruptcy and will permit the Debtors to distribute value to their stakeholders in a timely manner.

The Debtors were very close to coming to a definitive agreement on sales transactions previously, but due to renegotiations arising from commodity price fluctuations, none of the bids that were received in the process were ultimately actionable. Beginning in August 2020, the Debtors, with the assistance of their proposed investment banker, Lazard Frères & Co LLC (‘Lazard’), engaged with potential bidders. On November 19, 2020, the Court held a hearing and approved an Asset Sale to Terra [Dkt. No. 260]. The Asset Sale is expected to close on December 22, 2020 or soon thereafter. If the Asset Sale is consummated, or if the Debtors otherwise elect to pursue an Asset Sale, they will file an Asset Sale Election Notice. The Sale Proceeds of the Asset Sale will be distributed pursuant the Plan and any other order of the Bankruptcy Court, including the Sale Order (the ‘Asset Sale Distribution’). The RBL Agent has confirmed to the Debtors that the RBL Lenders prefer an acceptable and appropriate Asset Sale over an Equitization Restructuring.”

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):

• Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $1,105,000 and expected recovery is 100%.
• Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is undetermined and expected recovery is 100%.
• Class 3 (“RBL Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $214,900,000 and expected recovery is 11%. On the Effective Date: (i) if the Equitization Restructuring occurs, then (1) each Holder of an RBL Secured Claim or its designee (if applicable) shall receive its Pro Rata share of the New Equity Interests, and (2) the New Equity Interests shall be issued in accordance with the New Organizational Documents; or (ii) if the Asset Sale Distribution is elected, each Holder of an RBL Secured Claim shall receive its Pro Rata share of the Sale Proceeds after satisfaction of Administrative Claims, Priority Tax Claims, Other Priority Claims, Other Secured Claims and DIP Claims, up to the Allowed amount of such RBL Secured Claim, less the sum of the Unsecured Stakeholder Recovery and the Wind-Down Budget and including any residual Cash after the final decree is entered closing these Chapter 11 Cases, with such Cash to be distributed after such final decree is entered.
• Class 4 (“Term Loan Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $57,800,000 and expected recovery is 1%. Each Holder shall receive its Pro Rata share of: (i) if the Equitization Restructuring occurs, a distribution on account of Term Loan Lenders’ unsecured deficiency Claims as set forth in Class 5; or, (ii) if the Asset Sale Distribution is elected: (1) the Sale Proceeds after satisfaction of Administrative Claims, Priority Tax Claims, Other Priority Claims, Other Secured Claims, DIP Claims and RBL Claims, up to the Allowed amount of such Term Loan Claim; and (2) a distribution on account of Term Loan Lenders’ unsecured deficiency Claims as set forth in Class 5.
• Class 5 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $14,303,000 – $20,000,000 and expected recovery is 1%. Each Holder of a General Unsecured Claim that is not an RBL Deficiency Claim shall receive its Pro Rata share of: (i) if the Equitization Restructuring occurs, the Unsecured Stakeholder Recovery; or (ii) if the Asset Sale Distribution is elected, the greater of: (1) the Sale Proceeds after satisfaction of Administrative Claims, Priority Tax Claims, Other Priority Claims, Other Secured Claims, DIP Claims, RBL Claims and Term Loan Claims, up to the Allowed amount of such General Unsecured Claim; or (2) the Unsecured Stakeholder Recovery.
• Class 6 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 100%/0%.
• Class 7 (“Intercompany Interests”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of interests is N/A and expected recovery is N/A.
• Class 8 (“Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of interests is N/A and expected recovery is N/A.

Voting Results

On January 4, 2021, the Debtors' claims agent notified the Court of the Plan voting results [Docket No. 339], which were as follows:

• Class 3 (“RBL Secured Claims against All Applicable Debtors”): 6 claim holders, representing $160,394,503.05 in amount and 100% in number, accepted the Plan.
• Class 4 (“Term Loan Claims against All Applicable Debtors”): Pursuant to Section III.B.4(d) of the Plan, because the Asset Sale Proceeds are insufficient to satisfy any of the Term Loan Claims, the votes of the Term Loan Lenders were tabulated in Class 5. As per the Plan, and pursuant to section 1129(a)(8) of the Bankruptcy Code, Class 4 shall be deemed eliminated from the Plan for purposes of voting to accept or reject the Plan and for purposes of determining acceptance or rejection of the Plan.
• Class 5-2 (“General Unsecured Claims against Ursa Piceance Holdings LLC”): 1 claim holder, representing $57,814,846.03 in amount and 100% in number, accepted the Plan.

Key Documents

The Disclosure Statement [Docket No. 282] attached the following:

• Exhibit A: Plan of Reorganization
• Exhibit B: Corporate Organizational Chart
• Exhibit C: Liquidation Analysis
• Exhibit D: Financial Projections
• Exhibit E: Exit Facility Term Sheet (see further below)

The Debtors' Plan Supplement [Docket No. 330] attached the following:

• Exhibit A: Schedule of Retained Causes of Action
• Exhibit B: Schedule of Assumed and Assigned Contracts
• Exhibit C: Schedule of Contracts and Leases
• Exhibit D: Transaction Steps
• Exhibit E: Purchase and Sale Agreement
• Exhibit F: Plan Administrator
• Exhibit G: Asset Sale Election Notice
• Exhibit H: WindDown

  Liquidation Analysis and Projected Recoveries (see Exhibit C of Disclosure Statement [Docket No. 282] for notes)

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.

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