History
Yuma Energy merged with Davis Petroleum in 2016, then sank under bank debt and listing failures, and was liquidated under Chapter 7 in October 2020.
2016-2017: The Davis merger
Yuma Energy set out in 2016 to combine with Davis Petroleum Acquisition Corp. under a merger agreement dated February 10, 2016. On June 17, 2016 it filed its first registration statement for the deal. Yuma would move its incorporation from California to Delaware and carry out a reverse split (a share consolidation). Davis holders would end up with about 61.1% of the common stock and existing Yuma holders about 38.9%, so existing holders faced heavy dilution.
The terms shifted in September. An amendment to the agreement on September 2 let the board choose a reverse split anywhere from 1-for-10 to 1-for-20, with the ownership split unchanged. The final proxy statement followed on September 23, and the exchange certified the securities for listing on October 25.
The merger closed on October 26, 2016. The 1-for-20 split, the top of the range, was applied. Davis common holders received about 7,455,000 shares and about 1,754,000 Series D preferred shares, with a liquidation preference of roughly $19.4 million. About 12,201,000 common shares were outstanding after closing, and trading on the NYSE MKT began the next day. The deal brought private equity investors onto the share register: Red Mountain Capital Partners, Sankaty/Bain, HarbourVest and Dover Street. The combined company also took on a new $75 million senior secured revolving credit facility with Societe Generale, with an initial borrowing base of $44 million, maturing in October 2019. Share counts rose from about 12.2 million at the end of 2016 to about 22.7 million at the end of 2017, though the beats do not explain that increase. A filing in January 2017 added Davis's financial statements and closed out the merger story.
2018: Covenant breaches
The record for 2017 is quiet, but in 2018 the bank facility began to fail. On May 11, Yuma breached its debt-to-EBITDAX covenant (a test of debt against operating earnings) for the March quarter. Societe Generale granted a waiver but cut the borrowing base from $44 million to $35 million, and required more hedging and monthly reporting.
On August 3, Yuma breached its $4 million minimum-liquidity covenant and needed a second waiver, agreeing to weekly cash-flow forecasts. A third waiver came on September 5, covering three covenant breaches at once for the June quarter. On October 12, Societe Generale declared a formal Event of Default after Yuma again fell below the liquidity minimum. The lenders reserved the right to demand the $35 million outstanding and to add 2% default interest, but had not done so.
2019: Listing warnings and restructuring
On January 10, 2019, NYSE American warned that the share price had been low for too long and gave Yuma until July to fix it. On April 30, auditor Moss Adams declined to stand for reappointment after its report on the 2018 accounts raised substantial doubt about Yuma's ability to continue as a going concern. Marcum LLP was appointed for fiscal 2019.
A second listing notice arrived on June 21: stockholders' equity of $5,998,045 at March 31 was just under the $6.0 million minimum. Three days later the board approved a 1-for-15 reverse split, effective July 3, cutting shares from about 23.2 million to about 1.5 million. That cured the price problem but not the equity shortfall. A third notice on August 28 showed equity down to about $2.4 million against a $4.0 million threshold. On September 3 the exchange accepted a compliance plan running through December 2020, a reprieve rather than a fix.
On September 18, Yuma signed a forbearance agreement (a promise not to enforce its rights over defaults) with YE Investment LLC, an affiliate of Red Mountain, with Anthony Schnur signing as Chief Restructuring Officer. YE had bought the roughly $32.8 million bank debt. Under a Restructuring and Exchange Agreement on October 2, it cut that debt to a $1.4 million note convertible at about $0.129 a share, conditional on stockholder approval by December 31, 2019. On December 2 the credit agreement was amended to add a $2.0 million delayed-draw term loan.
2020: Collapse
The stockholder approval was never obtained. On April 7, 2020, YE Investment terminated the Restructuring Agreement and declared all amounts under the credit facility immediately due. On April 15 to 16, Yuma and three subsidiaries filed for Chapter 11 bankruptcy in the Northern District of Texas, planning a 90-day auction of properties in Louisiana, Texas, Wyoming and Oklahoma. An exchange filing to remove a class of its securities from listing followed on April 24.
The auction drew only minimal bids, amid the 2020 oil-price collapse and unresolved well problems, and YE Investment could not agree on a plan with the Unsecured Creditors Committee. On October 20, 2020, the case was converted to a Chapter 7 liquidation, where the company stood as of its latest beat.
Written from the 23 story beats below (2016 to 20 Oct 2020), which come from the company's own announcements and filings.