MorrisAnderson Debt Restructuring and Refinancing in a Distressed Industry

Petroplex Acidizing

Midland, Texas

Challenge

Permian Basin Oil Field service provider of acidizing to major oil field developers. Acidizing is a well maintenance activity to restock well productivity. Annual sales $20 million; down from peak of $70 million.Company had $120 million of secured debt. 


  • EBITDA plummeted from nearly $30 million/year to $2 million/year as oil price fell from $100 to $30 a barrel
  • Oil industry price decline had significantly reduced well drilling activity such that the Company’s job volume and pricing levels both plummeted by over 50%
  • Management did a good job of adjusting cost structure so company was able to stay EBITDA positive
  • Oil prices were starting to normalize around $50/barrel
  • PE firm owner was willing to inject additional capital if lenders would provide debt restructure with multi-year turnaround runway

Solution

  • MorrisAnderson created valuation based upon a 3-year forward looking and industry gradually recovering assumptions
  • Negotiated a consensual debt restructuring which converted secured debt into a performing Tranche A and non-performing Tranche B
  • New PE capital inserted pari passu with performing Tranche A debt and lender received minority warrants

Results

  • Recapitalization was done out of court
  • Company’s EBITDA has increased to $6 million/year
  • Company is adequately servicing secured debt
  • Company has 3-year runway which provides opportunity for oil industry to recover and secured lender to recoup their full investment and PE firm to recover their pari passu debt and have a longer term potential equity recovery
  • $15 million revolver refinanced

Daniel F. Dooley

Dan Dooley, CTP, is a Principal and CEO at MorrisAnderson based out of Chicago. He has a strong national reputation in crisis management, operations improvement, debt refinancing/restructuring and C-level positions. He is a frequent speaker at industry conferences and a regular author for industry periodicals. Dan has served on the Board of Directors of both Read More