Dune Energy declares bankruptcy after merger fails
ERIK LARSON
HOUSTON (Bloomberg) -- Dune Energy Inc., a Houston-based oil and gas explorer with operations in Texas and Louisiana, sought bankruptcy protection following a failed merger, making the company the latest victim of falling oil prices.
The Chapter 11 filing was triggered when revenue fell and a deal to merge with competitor Eos Petro Inc. fell through, according to court filings Monday in Austin, Texas. Eos backed out of the deal on March 4, Dune said.
Energy companies worldwide are facing pressure following a sharp drop in oil prices caused by increased production and weakening fuel demand. Global benchmark crude prices rose in February for the first time in eight months, rebounding from an almost 50% decline in 2014 as U.S. production surged to a 30-year high.
Oil producers, drillers, pipemakers and equipment providers have been stung by the plunge. A glut of supply from U.S. shale fields accompanied Saudi Arabia’s refusal to make production cuts that would erode its market share.
Before the current slump, U.S. oil averaged more than $90/bbl for half a decade, ushering in an era of easy lending to wildcat drillers seeking to join the North American energy boom. When the market tumbled and crude dropped below $45 for the first time in six years, companies burdened by heavy debt began to crack.
Cal Dive International Inc., a Houston-based provider of manned diving services for the offshore oil and gas industry, filed a Chapter 11 petition this month, blaming falling oil prices and bad weather that slowed construction projects.
Neglected Fields
Dune, founded in 1998, focused on rejuvenating long- neglected oil fields discovered by Texaco in the 1930s along the Louisiana coastline.
The company will seek court approval to sell its assets at an auction June 9 in Houston, according to its filings. Dune, which said no bids have been made in advance, listed assets of $229.5 million against debt of $144.2 million. It asked the court to approve a loan of as much as $10 million to finance operations in bankruptcy, with Bank of Montreal and CIT Capital Securities LLC as lenders.
Eos owes Dune a fee of $5.5 million for backing out of the September 2014 merger agreement, according to the bankruptcy court filing.
Eos backed out of the deal because it lost financing for the merger as a result of falling oil prices, the Los Angeles- based company said in a Feb. 25 statement. The February deadline for the tender offer was then briefly extended.
Nick Constant, a managing member of Eos, didn’t immediately return a call for comment on Dune’s discussion of the failed merger.
The case is Dune Energy Inc., 15-10336, U.S. Bankruptcy Court, Western District of Texas (Austin).
