Kansas’ largest oil and gas producers near bankruptcy

Two of Kansas’ largest oil and gas producers say they face the possibility of bankruptcy.

SandRidge Energy, of Oklahoma City, and Linn Energy, of Houston, said in U.S. Securities and Exchange Commission filings this week that they are negotiating with bondholders to reduce their heavy debt loads.

Linn, which operates in several basins around the country, was ranked as Kansas’ top natural gas producer, with a dominant stake in the Hugoton natural gas field in southwest Kansas.

SandRidge was ranked as the top oil producer in Kansas and the second-largest natural gas producer in 2014, the most recent year available, operating largely in Sumner and Harper counties as well as as in northern Oklahoma.

In a public filing late Wednesday, SandRidge Energy said it is in talks with bondholders to reduce the company’s nearly $4 billion long-term debt.

Because of the uncertainty of reaching an agreement, the company said it expects its auditor to write in the company’s financial report “an explanatory paragraph regarding substantial doubt as to the company’s ability to continue as a going concern.”

The company has delayed filing its annual financial report while it negotiates. It failed to pay its required bond interest payment in February, but said it paid $50.1 million in interest within the 30-day grace period.

SandRidge, under free-spending oil man Tom Ward, bought millions of acres of land leases and pioneered the use of more expensive horizontal drilling technology in the Mississippian Limestone formation of Oklahoma and Kansas. He also spent millions building large pipeline systems to cut trucking costs.

The company injected immense amounts of waste saltwater produced during drilling into the ground, a practice that has become controversial because some have linked it to an increase in earthquakes.

The impact of the price collapse on the company was muted in 2015. Under new executives, it cut costs dramatically, borrowed more than $1 billion in cash and hedged some of its oil at higher prices for the year, so it was able to get through 2015.

The company said its 2015 revenue and profits will be significantly lower than 2014 because of lower oil and gas prices, even though production was up 9 percent for the year.

SandRidge’s stock was delisted from the New York Stock Exchange in January and now trades for 14 cents a share.

Linn Energy is set up as a master limited partnership, which has units rather than shares of stock. It has spent billions in recent years buying gas and oil production.

It said in its Tuesday filing that it already has missed payments on three sets of bonds but has a 30- or 45-day grace period on the bonds. If the creditors don’t agree to reductions in the debt, payment will be accelerated and Linn will be in default.

The company’s auditor KPMG wrote: “The Company does not have sufficient liquidity to meet the accelerated debt requirements. These issues raise substantial doubt about the Company’s ability to continue as a going concern.”

Linn Energy, which is listed on the NASDAQ, now trades at 72 cents a share.

This story was originally published March 17, 2016 at 9:30 AM with the headline "Kansas’ largest oil and gas producers near bankruptcy."