Gavilan Resources files bankruptcy to market facilities and assets

By Caroline Salls

Pittsburgh, May 18 – Gavilan Resources, LLC filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the Southern District of Texas.

According to a statement filed with the court by chief executive officer David E. Roberts Jr., in March 2017, Gavilan, EF UnSub LP (UnSub) and SN EF Maverick, LLC (together with Sanchez Energy Corp., Sanchez), purchased assets in the Eagle Ford shale, known as the Comanche assets, from Andarko Petroleum.

Roberts said Gavilan, Sanchez and UnSub also became parties to a number of agreements related to the operations and management of the Comanche assets.

However, Roberts said Sanchez, which is a debtor in its own pending Chapter 11 cases, “continues wrongfully to operate the Comanche assets.”

Roberts said the decline in oil prices from the combined effect of the Covid-19 pandemic and the flooding of oil markets by warring international producers forced Gavilan into Chapter 11.

Since fall 2018, Roberts said Gavilan has been entangled in “an increasingly unworkable relationship with Sanchez,” which was brought on by Sanchez’s own financial difficulties. The company has also been in arbitration and litigation stemming from Sanchez’s defaults under the operating agreements, as well as Sanchez’s Chapter 11 proceedings.

Roberts said Gavilan plans to use the Chapter 11 process to market its facilities and assets while continuing to pursue operatorship of the Comanche assets.

The company is seeking court approval to use the cash collateral of its pre-bankruptcy secured parties.

Gavilan said about $32 million of its cash on hand as of the bankruptcy filing date constitutes cash collateral.

Without access to the cash, Roberts said the company would be unable to satisfy trade payables, implement its sales process and administer its Chapter 11 cases.

According to court documents, Gavilan has $1 billion to $10 billion in assets and $500 million to $1 billion in debt.

The company’s largest unsecured creditors are SN EF Maverick LLC of Houston, with a $10.03 million trade debt claim and WGR Operating LP of The Woodlands, Tex., with a $4.93 million trade debt claim. No other unsecured creditors were listed with claims of $1 million or more.

Gavilan Resources is a Houston-based private company established in 2017 in partnership with Blackstone to acquire, develop and produce oil and natural gas assets in the Eagle Ford Shale play in South Texas. The Chapter 11 case number is 20-32656.

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