History
Petsec Energy Inc., a Gulf of Mexico driller, borrowed $100 million in 1997, sank into losses and default, entered Chapter 11 in 2000 and sold its Gulf of Mexico interests, mostly to Apache.
1997-1998: Borrowing to grow
Petsec Energy Inc. was a Lafayette, Louisiana driller working in the Gulf of Mexico. It was the main US operating subsidiary of the Australian-listed Petsec Energy Ltd. On June 13, 1997 it privately sold $100 million of 9.5% Senior Subordinated Notes due 2007, raising $96.6 million after costs, mostly to repay its bank credit facility. In July 1997 it registered an offer to swap these for freely tradable notes on identical terms.
The 1997 results, reported in March 1998, looked healthy. Net income was $13.1 million, up from $8.9 million in 1996. Total assets grew to $234.1 million, and long-term debt rose to $136.9 million after the new notes.
1999: Reversal and a first sale to Apache
The next year brought a sharp reversal. In January 1999 Petsec agreed to sell half of its working interests in certain Gulf of Mexico properties to Apache Corporation, first by letter and then by a signed purchase agreement. The sale closed February 1, 1999 for about $68.3 million cash, covering a 50% interest across 23 leases.
The 1998 annual report, filed in March 1999, showed a net loss of $91.3 million, driven mainly by a $96.9 million operating loss. Shareholder's equity fell to a $42.1 million deficit, and bank borrowings rose to $74 million.
Losses continued. In November 1999 Petsec disclosed it was in default on its bank credit facility, which also put the $100 million notes in default, and said it was considering Chapter 11 reorganization. The nine-month loss for 1999 was $14.5 million.
2000: Chapter 11 and the final sale
On January 18, 2000 Petsec signed a new $30 million secured facility with Foothill Capital Corp, used partly to retire its earlier bank debt. The facility barred interest payments on the notes, and management confirmed it had missed the December 15, 1999 interest payment while it negotiated with a bondholder steering committee.
The 1999 annual report showed the net loss narrowing to $29.5 million, but total assets nearly halved to $93.5 million and the equity deficit deepened to $71.3 million. The missed October 29, 1999 $3.2 million principal payment had triggered the notes default, and the notes were reclassified as current liabilities.
Petsec filed for Chapter 11 on April 13, 2000 in the Western District of Louisiana and kept operating as debtor-in-possession. In June it agreed with the creditors' committee and noteholders on a court-supervised sale, hiring Houlihan Lokey Howard & Zukin as broker. Proceeds would go first to creditors, with any residual to its sole shareholder, Petsec (U.S.A.) Inc.
Following a November 21, 2000 court order, Petsec sold its remaining 50% interest to Apache for $51.2 million, effective October 1, 2000, giving Apache full ownership.
2001: The close
On January 16, 2001 Petsec formally suspended its SEC reporting obligations. It reported exactly one holder of record, its parent Petsec (U.S.A.) Inc. As of that date the company had sold its Gulf of Mexico interests and was defunct after its Chapter 11 liquidation.
Written from the 13 story beats below (1997 to 16 Jan 2001), which come from the company's own announcements and filings.