The energy company, which US-based Riverstone first backed in 2012, sought chapter 11 protection last week for the second time in two years

Fieldwood Energy LLC’s second bankruptcy in two years threatens a nearly $2bn bet by Riverstone Holdings in the offshore driller.

Riverstone had invested $1.82bn in the Houston company as of 30 September, including co-investments, according to a firm document viewed by WSJ Pro Private Equity. Riverstone at the time valued its holdings in the company at $615m, roughly a third of its investment, the document showed.

Fieldwood last week filed for chapter 11 bankruptcy protection under the weight of low oil prices and $1.8bn in debt, WSJ Pro Bankruptcy reported.

The company had emerged from a bankruptcy reorganisation in 2018 with its debt cut in half, but this year’s oil market swoon as the coronavirus pandemic swept the world depressed demand and pushed Fieldwood back into the court’s arms.

Riverstone, a New York-based private equity firm that focuses on energy, backed Fieldwood’s creation in 2012 from its Riverstone Global Energy and Power Fund V LP, which wrapped up fundraising in 2013 with $7.71bn.

US oil prices at that time hovered around $100 a barrel, more than double their current levels, encouraging big, debt-fueled bets in energy companies by private equity investors.

Around the same time as it backed Fieldwood, Riverstone invested in EP Energy Corp. in a 2012 deal alongside Apollo Global Management and other investors. The shale driller filed for chapter 11 protection in October, one of more than 200 oil and natural gas producers to have sought bankruptcy protection since oil prices began to plunge in mid-2014.

Riverstone had invested $500m from its fifth Global Energy fund in EP Energy. By September 2019, the firm valued that investment at just $82m, according to the document viewed by WSJ Pro Private Equity.

The Riverstone fund’s performance as of September 2019 placed it in the bottom quartile among 14 natural resources and energy funds that started investing in 2012 and focused on North America, according to data provider Preqin. The group’s median net internal rate of return as of Sept. 30 was 4.9%, Preqin said.

Fieldwood, which was formed with $600m from Riverstone and $25m from its management team, in 2013 acquired Apache’s Gulf of Mexico shelf business for $3.75bn. It was the first of a $5bn series of acquisitions that turned Fieldwood into one of the largest oil and gas companies in the region.

But Fieldwood’s high debt load prompted the company to file for its first chapter 11 bankruptcy in 2018. The reorganisation that followed left Fieldwood with $1.66bn in debt while an equity rights offering funded the acquisition of new assets. Riverstone’s stake in the company fell to about 49% today from 98% before the offering.

Even with its reduced debt load, Fieldwood struggled as oil prices plunged again this year. In court filings, the company also cited the increased cost of plugging retired oil and gas wells as a reason for its latest bankruptcy. Under a restructuring plan, Fieldwood’s assets would be split into two or more entities. One would focus on legacy fields acquired from Apache, while Fieldwood is seeking buyers for deepwater and other assets.

Fieldwood owns a roughly 10% stake in a Mexican business that isn’t part of the bankruptcy. Riverstone, which owns the remaining 90% in Fieldwood Energy E&P Mexico S de RL de CV, had invested $113m in the company as of September 2019 and valued its stake at $203m.

Source: Wall Street Journal

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