ULTRA PETROLEUM CORP. (OTCMKTS:UPLMQ) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
| Entry Into a Material Definitive Agreement. |
On November21, 2016, Ultra Petroleum Corp. (UPL) and its
subsidiaries UP Energy Corporation, Ultra Resources, Inc.,
Keystone Gas Gathering, LLC, Ultra Wyoming, Inc., Ultra Wyoming
LGS, LLC, UPL Pinedale, LLC, UPL Three Rivers Holdings, LLC
(collectively, with UPL, the Ultra Entities) entered
into:
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A Plan Support Agreement dated November21, 2016 (the Plan Support Agreement) with certain holders of the 5.75% Senior Notes Due 2018 issued by UPL to that certain Indenture dated December12, 2013 with respect thereto (the 2018 Notes); certain holders of the 6.125% Senior Notes Due 2024 issued by UPL to that certain Indenture dated September18, 2014 with respect thereto (the 2024 Notes) (collectively, herein, the PSA Noteholders); and certain holders of common stock issued by UPL (thePSA Equity Owners and, collectively with the PSA Noteholders, the Plan Support Parties); and |
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A Backstop Commitment Agreement dated November21, 2016 (the Backstop Agreement) with the parties thereto (the Commitment Parties). |
Plan Support Agreement
The Plan Support Agreement sets forth the agreement among the
Ultra Entities and the Plan Support Parties to seek and support a
proposed joint plan of reorganization for the Ultra Entities (the
Plan) on and subject to the terms and conditions set
forth therein (as previously reported, on April29, 2016, the
Ultra Entities filed voluntary petitions for reorganization under
chapter 11 of the United States Bankruptcy Code (the
Code) in the United States Bankruptcy Court for the
Southern District of Texas (the Court); the petitions
are being jointly administered under the caption In re Ultra
Petroleum Corp., et al, Case No.16-32202 (the Ultra
Proceedings)). The Plan Support Agreement includes a term
sheet detailing the terms and conditions of the Plan (the
Term Sheet). The Backstop Agreement details the terms
and conditions on which the Commitment Parties have agreed to
fund an offering of rights to purchase shares of common stock in
UPL in connection with the Plan (the Rights Offering).
Certain provisions, terms and conditions set forth in the Plan
Support Agreement and the Term Sheet are outlined below:
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All allowable claims and interests of UPL are to be restructured under the Plan. |
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The Rights Offering is expected to raise $580.0 million in cash at an implied 20% discount (the Rights Offering Price) to the total enterprise value of the Ultra Entities under the Plan. |
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Under the Plan, the total enterprise value of the Ultra Entities will be $6.0 billion (thePlan Value); provided, that if the average closing price of the 12-month forward Henry Hub natural gas strip price during the seven (7)trading days preceding the commencement of the Rights Offering solicitation is: (i)greater than $3.65/MMBtu, the Plan Value shall be $6.25 billion; or (ii)less than $3.25/MMBtu, the Plan Value shall be $5.5 billion. |
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Under the Plan assuming a $6.0 billion Plan Value (with the figures below to be adjusted with Plan Value adjustments, consistent with the terms of the Term Sheet): |
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Each holder of the 2018 Notes and 2024 Notes will receive (a)such holders pro rata share of 36.2% of the equity in UPL after the reorganization is consummated and (b)such holders share of rights to participate in the Rights Offering for 16.1% of the equity, all subject to dilution by the Management Incentive Plan. |
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The Commitment Parties will receive their pro rata share of 1.3% of the equity in UPL after the reorganization is consummated. |
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Each holder of claims with respect to certain unsecured senior notes issued by Ultra Resources, Inc. (the OpCo PPN Claims) and/or the Ultra Resources, Inc. credit agreement dated October6, 2011 will receive such holders respective share of (a)$2.0 billion in principal amount of new unsecured notes to be issued by Ultra Resources, Inc. upon the confirmation of the Plan (the New OpCo Notes) and (b)cash. |
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An additional $200.0 million (or such other amount as may be determined by the Court) of New OpCo Notes will be held in reserve pending, or issued pro rata to each holder of any applicable allowed make-whole claim with respect to the OpCo PPN Claims (if any, the Make-Whole Claims) following, resolution of the Make-Whole Claims and the objection to the Make-Whole Claims filed (or to be filed) by the Ultra Entities in connection with the Plan. |
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Each holder of other claims in the Ultra Proceedings will receive cash in the full amount of such holders allowed claim after resolution of any objections filed (or to be filed) by the Ultra Entities in connection with the Plan. |
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The Plan Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet certain milestones relating to the filing, confirmation, and consummation of the Plan and in the event of certain breaches by either the Ultra Entities or the Plan Support Parties. |
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The Plan will provide for the establishment of a management incentive plan (theManagement Incentive Plan) for UPL under which 7.5% of the fully-diluted, fully-distributed shares of common stock in UPL will be reserved for issuance from time to time to management of the Ultra Entities (the Share Reserve). Forty percent (40%)of the Share Reserve will be granted to members of management identified by the UPL board of directors in place prior to the effective date of the Plan; provided, that such grants will automatically expire if such grants have not vested before the fifth anniversary of the Plan effective date. The remaining sixty percent (60%)of the Share Reserve will be available to be granted by the UPL board of directors in place after the effective date of the Plan. |
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The UPL board of directors will, on the effective date of the Plan, select two new members of the UPL board of directors that are reasonably acceptable to the existing Chairman of the UPL board of directors from a list of directors proposed by individual members of the HoldCo Noteholder Committee and the Equityholder Committee (as such terms are defined in the Plan Support Agreement). These two additional directors will serve a two-year term beginning on the effective date of the Plan, and their vote will be required for the Ultra Entities to approve any material mergers and/or acquisition transaction during such two-year term. |
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The Plan will provide for standard and customary releases with respect to the Ultra Entities, the Plan Support Parties, and the directors and management of the Ultra Entities, as well as standard and customary exculpation, discharge and injunction provisions. |
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Each Plan Support Party will not sell or transfer or otherwise dispose of, in over-the-counter transactions, its UPL common stock (an OTC Transfer), unless such OTC Transfer is to another Plan Support Party or any other entity (each, an OTC Transferee) that first agrees to become a party to, and be bound by the terms of, the Plan Support Agreement, which agreement by such Plan Support Party, each OTC Transferee and any subsequent OTC Transferee will be effected through the settlement of the OTC Transfer. |
Backstop Agreement
to the Backstop Agreement, the Commitment Parties have agreed to
backstop the Rights Offering to be conducted in accordance with
the Plan. In accordance with the Plan, the Backstop Agreement and
certain Rights Offering procedures to be filed as part of the
Plan, UPL will offer eligible debt and equity holders, including
the Commitment Parties, the right to purchase shares of new
common stock in UPL upon effectiveness of the Plan for an
aggregate purchase price of $580.0 million. The Rights Offering
will consist of the following offerings:
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HoldCo Noteholders (as defined in the Backstop Agreement) shall be granted rights (the HoldCo Noteholder Rights Offering) entitling each such holder to subscribe for the Rights Offering in an amount up to its pro rata share of new common stock (the HoldCo Noteholder Rights Offering Shares), which HoldCo Noteholder Rights Offering Shares, collectively, will reflect an aggregate purchase price of $435.0 million. |
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HoldCo Equityholders (as defined in the Backstop Agreement) shall be granted rights (the HoldCo Equityholder Rights Offering) entitling each such holder to subscribe for the Rights Offering in an amount up to its pro rata share of new common stock (the HoldCo Equityholder Rights Offering Shares and, together with the HoldCo Noteholder Rights Offering Shares, the Rights Offering Shares), which HoldCo Equityholder Rights Offering Shares, collectively, will reflect an aggregate purchase price of $145.0 million. |
Under the Backstop Agreement, certain Commitment Parties have
agreed to purchase the HoldCo Noteholder Rights Offering Shares
and the HoldCo Equityholder Rights Offering Shares, as
applicable, that are not duly subscribed for to the HoldCo
Noteholder Rights Offering or the HoldCo Equityholder Rights
Offering, as applicable, by parties other than Commitment Parties
(the Backstop Commitment) at the Rights Offering Price.
The Ultra Entities will pay the Commitment Parties upon the
closing of the Rights Offering a Commitment Premium equal to 6.0%
of the $580.0 million committed amount (the Commitment
Premium). The Commitment Premium shall be fully earned as of
the date of the Approval Order (as defined in the Plan Support
Agreement). If the Approval Order is entered, the Commitment
Premium will be paid either in the form of new common stock at
the Rights Offering Price, if the Plan is consummated as
contemplated in the Plan Support Agreement, or in cash in the
amount of 4.0% of the $580.0 million committed amount, if the
Backstop Agreement is terminated under certain circumstances
other than, for example, a material breach by
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the Commitment Parties. All amounts payable to the Commitment
Parties in their capacities as such for the Commitment Premium
shall be paid pro rata based on the amount of their respective
backstop commitments on the Plan effective date (as compared to
the aggregate backstop commitment of all Commitment Parties).
However, the Commitment Premium shall not be paid to any
Commitment Party that has defaulted with respect to its
respective backstop commitment or is otherwise in breach of the
Backstop Agreement in any material respect.
The rights to purchase new common stock in the Rights Offering,
any shares issued upon exercise thereof, and all shares issued to
the Commitment Parties in respect of their backstop commitments
to the Commitment Premium, will be issued (i) to an effective
registration statement under the Securities Act of 1933, as
amended (the Securities Act), or (ii)in reliance upon
the exemption from the registration requirements of the
securities laws to Section1145 of the Bankruptcy Code. All shares
issued to the Commitment Parties to the Backstop Agreement in
respect of their Backstop Commitment will be issued (i) to an
effective registration statement under the Securities Act or
(ii)in reliance upon the exemption from registration under the
Securities Act, provided by Section4(a)(2) thereof and/or
Regulation D thereunder. As a condition to the closing of the
transactions contemplated by the Backstop Agreement and the Term
Sheet, UPL will enter into a registration rights agreement with
the Commitment Parties entitling such Commitment Parties to
request that UPL register their restricted securities for sale
under the Securities Act at various times.
The Commitment Parties commitments to backstop the Rights
Offering, and the other transactions contemplated by the Backstop
Agreement and the Term Sheet, are conditioned upon the
satisfaction of all conditions to the effectiveness of the Plan,
and other applicable conditions precedent set forth in the
Backstop Agreement and the Term Sheet, including the entry of the
Approval Order and the execution and delivery of the Backstop
Agreement. The issuances of new common stock to the Rights
Offering and the Backstop Agreement are conditioned upon, among
other things, confirmation of the Plan by the Court, and the
Plans effectiveness.
The foregoing descriptions of the Plan Support Agreement, the
Term Sheet, and the Backstop Agreement are summary only and are
qualified in their respective entireties by reference to the
complete text of the applicable documents, copies of which are
attached as exhibits to this Current Report on Form 8-K and
incorporated herein by reference. Please see Item9.01 below and
the attached exhibits.
Section7. |
Regulation FD |
Item7.01. |
Regulation FD Disclosure. |
Press Release
On November22, 2016, UPL issued a press release announcing its
entry into the Plan Support Agreement and the Backstop Agreement,
as described above in Item1.01. The press release is attached
hereto as Exhibit 99.1 to this Current Report on Form 8-K. Please
see Item9.01 below and the attached exhibit.
The information included in this Current Report on Form 8-K under
Item7.01 and Exhibit 99.1 is being furnished and shall not be
deemed filed for purposes of Section18 of the Securities Exchange
Act of 1934, as amended (the Exchange Act), or otherwise
subject to liabilities of that Section, unless the registrant
specifically states that the information is to be considered
filed under the Exchange Act or incorporates it by reference into
a filing under the Exchange Act or the Securities Act of 1933, as
amended.
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Confidentiality Agreement Disclosures
Prior to execution of the Plan Support Agreement, UPL entered
into certain Confidentiality and Non-Disclosure Agreements with
the Plan Support Parties (collectively, as amended, the
Confidentiality Agreements). to the Confidentiality
Agreements, UPL agreed to publicly disclose all material
non-public information regarding the Ultra Entities that was
provided to the Plan Support Parties (the Cleansing
Materials), including the Term Sheet, the Backstop Agreement
and certain other information the legal and financial advisors
for the Plan Support Parties asked UPL to disclose.
Copies of the Cleansing Materials are attached as Exhibit 99.2 to
this Current Report on Form 8-K. Please see Item9.01 below and
the attached exhibits.
Portions of the financial projections, forecasts, oil and gas
reserve estimates and other information included in the Cleansing
Materials were not prepared with a view toward public disclosure
or compliance with the published guidelines of the U.S.
Securities and Exchange Commission or the guidelines established
by the American Institute of Certified Public Accountants
regarding financial projections or forecasts or oil and gas
reserve estimates. Any such projections do not purport to present
the estimated value or financial condition of any of the Ultra
Entities in accordance with U.S. generally accepted accounting
principles. The inclusion of any such projections or estimates in
the Cleansing Materials should not be relied upon as such. In
addition, the format of portions of the Cleansing Materials were
determined by the professional advisors of the Plan Support
Parties, not by the Ultra Entities. Neither any of the Ultra
Entities nor any of their representatives undertakes any
obligation to publicly update or correct any of the projections,
forecasts, estimates or other information included in the
Cleansing Materials, even if any or all of the assumptions
underlying such projections, forecasts, estimates or other
information prove to have been incorrect.
Section9. |
Financial Statements and Exhibits |
Item9.01. |
Financial Statements and Exhibits. |
(d) |
Exhibits |
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| 10.1 |
Plan Support Agreement dated November 21, 2016, by and among Ultra Petroleum Corp. and the other Ultra Entities, on the one hand, and certain holders of common stock in Ultra Petroleum Corp. and debt securities issued by Ultra Petroleum Corp., on the other hand |
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| 10.2 |
Backstop Commitment Agreement dated November 21, 2016, by and among Ultra Petroleum Corp. and the other Ultra Entities, on the one hand, and certain holders of common stock in Ultra Petroleum Corp. and debt securities issued by Ultra Petroleum Corp., on the other hand |
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| 99.1 | News Release dated November 22, 2016 | |
| 99.2 | Cleansing Materials |
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About ULTRA PETROLEUM CORP. (OTCMKTS:UPLMQ)
Ultra Petroleum Corp. is an independent oil and gas company. The Company is engaged in the development, production, operation, exploration and acquisition of oil and natural gas properties. The Company operates in natural gas and oil exploration and development industry, with geographical segment, the United States. It owns oil and natural gas leases in Wyoming, Utah and Pennsylvania. In Colorado, the Company owns oil and natural gas leases, as well as fee oil and gas rights. The Company focuses on developing its natural gas reserves in the Green River Basin of southwest Wyoming, the Pinedale and Jonah fields; its oil reserves in the Uinta Basin in Utah, and its natural gas reserves in the Appalachian Basin of Pennsylvania. The Company owns interests in approximately 104,000 gross (approximately 68,000 net) acres in Wyoming covering approximately 190 square miles. ULTRA PETROLEUM CORP. (OTCMKTS:UPLMQ) Recent Trading Information
ULTRA PETROLEUM CORP. (OTCMKTS:UPLMQ) closed its last trading session 00.00 at 5.34 with 16,184,089 shares trading hands.
