This week’s Interview of the Week is with Matt McCarroll, CEO of Fieldwood Energy. Fieldwood Energy ranks among the largest operators in the Gulf of Mexico, producing over 13,000 BOE each day from over 1,000 wells in both shallow and deepwater locations.
Q: Fieldwood has been restructuring. What is the current state of the company?
A: The company has never been in a better situation. We have been in business now for four and half years and we have a very profitable operation, with our only challenge being that we had too much debt. We had an overleveraged balance sheet, consisting of the debt we incurred initially when we made acquisitions from Apache Corporation and Sandridge Energy in 2013 and 2014, when prices were at US$100/b.
For that reason, we started discussions last fall with all our stakeholders and finalized agreements to equitize over US$1.6 billion of debt. We raised US$525 million of new capital and we simultaneously closed the acquisition of the entirety of Noble Energy’s deepwater assets in the Gulf of Mexico. The restructuring means we have gone from being five times overleveraged to 1.5 times and we have significant liquidity as well as 40 percent more production. We have done this with the support of 100 percent of our lenders and stakeholders.
The only worrying factor to people who do not understand the process is that in the US, a Chapter 11 process is the most expedient way to effectuate a restructuring, even though it may be possible to do it out of court. The word “bankruptcy” scares many people, but in our case, we got in and out of bankruptcy in only 45 days. We restructured and emerged from the process in great shape but most important to our management team, all our vendors, all the government agencies, all our partners and all our employees and contractors continued to be paid throughout. Essentially, business continued as usual. We always had plenty of money to run the company – we just needed to restructure our balance sheet. Now we’ve accomplished that and we have emerged a much stronger company.
Q: What does this mean for the company in the medium term?
A: We have cut our annual interest payments by approximately 50 percent and we reduced our debt by about 50 percent. We increased our assets and our cash flow, so the business has never been stronger. We are going on the offensive again.
At this moment, we are putting two rigs to work on the US side of the Gulf of Mexico. We have another rig coming this summer so we are going to get back to drilling. We are going to increase our US capital budget by over five times from 2017 to 2018. We are going to be a much more active company with the ability to fund our Mexico operations in development. All in all, it is a great outcome. We are bringing on a world-class deepwater team to manage Noble Energy’s assets and we are very excited that we will be drilling deepwater wells on the US side of the Gulf of Mexico.
Q: What is your perspective on how the licensing rounds have progressed, and what does it mean for the players you have seen entering the market?
A: There has been a lot of bidding activity but not much well drilling and construction activity. The only companies that have ever actually drilled wells are winners from Round 1.1 and 1.2: Talos Energy, Pan American Energy, ENI and ourselves. There is a lot of activity to come. I think a legitimate question is whether or not the regulatory process and the administrative process within government agencies such as the Ministry of Energy, CNH and ASEA can handle the volume of work that is coming.
We know how long it took for us to get permits to drill and to get our appraisal plan approved and that was only with four operators. Now there will be more than 73 operators and the volume of work and permitting is going to be dramatically higher. We are all getting better over time as CNH and ASEA gain a greater understanding of the processes. But the process will really have to pick up speed or it is going to hit some bumps.
Q: The licensing rounds have been launching blocks faster than expected. How will this translate into production?
A: There are many practical elements that have not been figured out yet. For example, as of March 2018 there are only two CNH-approved delivery points for oil offshore. We need many more and we do not know where we are going to place or market the oil and gas we find. It is hard for us to make the commitment to spend hundreds of millions of dollars developing a field until we are absolutely certain how we are going to sell that oil and where we are going to sell it.
This is an excerpt from the 2018 edition of Mexico Oil and Gas Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy Mexico Oil and Gas Review or access our digital copy.
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