Yuma Energy files for Chapter 11 protection to implement liquidation

By Wendy Van Sickle

Columbus, Ohio, April 15 – Yuma Energy, Inc. and its subsidiaries, Yuma Exploration and Production Co., Inc., Davis Petroleum Corp. and Yuma Cos., Inc., have filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Northern District of Texas, according to a news release.

Yuma said that, during the first quarter of 2020, its cash position deteriorated, and its cash flow from operations is no longer sufficient to cover its operating costs.

The company plans to continue to operate its business in the normal course during the court-supervised bankruptcy process.

The debtors plan to use the Chapter 11 process to implement the liquidation of their assets in an effort to maximize values and recoveries to stakeholders and intend to seek immediate court approval to hold an auction for substantially all of their assets, which primarily consist of operating and non-operating interests in several properties in Louisiana, Texas, Wyoming and Oklahoma.

The auction is expected to occur within the first 90 days of the bankruptcy filings.

The debtors may negotiate to obtain a new debtor-in-possession financing to provide working capital to support normal operations and the sale of assets during the Chapter 11 process.

Effective on April 10, Anthony C. Schnur resigned from his positions as interim chief executive officer, interim chief financial officer and chief restructuring officer of the company.

Shortly thereafter, the company engaged Ankura Consulting Group, LLC as its financial adviser. Schnur was recently hired by Ankura will oversee the operation of the debtors during the bankruptcy process.

"In 2019 and early 2020, we took proactive steps to recapitalize our company's financial structure under a credit agreement with our lender YE Investment, LLC and a restructuring and exchange agreement with Red Mountain Capital Partners LLC and certain of its affiliates including YE,” Schnur said in the release.

“Unfortunately, YE recently notified us that it was terminating the credit agreement due to the company's failures to make timely interest payments and to comply with other covenants, and further, that it was also accelerating all payments due under the credit agreement so that all outstanding principal, accrued interest, fees and other obligations under the credit agreement became immediately due and payable.

“Simultaneous with the termination of the credit agreement, Red Mountain notified us that it was terminating the restructuring agreement.

"Our revenues and cash position have eroded to the point of unsustainability primarily driven by the severe downturn in oil prices. After much consideration, the company's board of directors came to the decision that the use of the Chapter 11 liquidation process was the best path forward to maximize values and recoveries."

Yuma Energy is an oil and gas company based in Houston.

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