Baseline Oil & Gas files for bankruptcy protection

HOUSTON — Energy producer Baseline Oil & Gas Corp., citing turmoil in the economy and global credit markets, said Monday it has filed for Chapter 11 bankruptcy protection after securing agreements with some creditors.

The filing was in U.S. Bankruptcy Court in Houston. The company said that as of June 30 it had liabilities of $138.6 million and assets of $2.96 million.

The company will continue to operate its business through the court process, and will seek confirmation of its reorganization plan. Under a so-called prepackaged bankruptcy plan, a company negotiates with major lenders prior to filing for protection.

Baseline Oil & Gas’ Chapter 11 case was filed pursuant to a plan support agreement dated July 17. The agreement is between the company and holders of more than 85 percent of the company’s outstanding 15 percent senior secured notes due 2009 and its 12.5 percent senior secured notes due 2012.

The company received ballots from noteholders of more than $107.3 million of the $122.8 million worth of senior notes outstanding this month. All of the noteholders that returned ballots accepted the plan, the company said, and elected to participate in Baseline’s exit financing.

The company said it intends under its plan of reorganization to pay all of its royalty owners, vendors and other service providers in full, whether their claims arose prior to or after the Chapter 11 filing. It also expects to continue paying its employees’ salaries and benefits and to maintain its cash management systems.

The company’s plan calls for $5 million of new capital to be provided as exit financing. After its reorganization plan is implemented, current equity would be canceled and rendered worthless. Prepetition noteholders would receive securities in the reorganized company, consisting of new 10 percent subordinated secured notes, shares of junior preferred stock and shares of new common stock.