Penn Virginia, one of the region's oldest businesses, files for bankruptcy protection

Penn Virginia Corp. of Radnor, one of the region's oldest surviving businesses, filed for bankruptcy protection Thursday, a casualty of the worldwide plunge in energy prices.

Founded in 1882 by Philadelphia coal barons, the company transitioned to shale-oil production in recent years but was overwhelmed by last year's oil-price collapse, which eroded its revenue and diminished the value of its oil and gas reserves.

The company, whose acreage is concentrated in Texas but includes holdings in Pennsylvania's Marcellus Shale region, listed assets of $518 million and debts of $1.4 billion in filings with the U.S. Bankruptcy Court for the Eastern District of Virginia.

"Like many other exploration and production companies, Penn Virginia has been significantly affected by the recent and continued dramatic decline in oil and natural gas prices," Edward B. Cloues II, chairman and interim chief executive, said in a statement.

"We believe using the Chapter 11 process is the most efficient way to achieve our financial objectives and deleverage the company's balance sheet," he said.

The worldwide oil glut, engineered by Saudi Arabia to inflict pain upon competing oil producers, has delivered great benefits to energy consumers but crippled American shale-oil ventures that had borrowed heavily to expand drilling.

Penn Virginia joins the ranks of 69 oil and gas companies nationwide that have filed for bankruptcy since the beginning of 2015, according to Haynes & Boone, a Houston law firm that publishes the Oil Patch Bankruptcy Monitor. The bankrupt companies had a total of $34.3 billion in debt, much of it now wiped out.

The rout in oil and gas prices has not spared Pennsylvania, where the number of drill rigs operating in the Marcellus Shale region has plummeted from 115 five years ago to 16 this month. Penn Virginia, while it maintains a small number of operating gas wells in Pennsylvania, halted new drilling in the Marcellus several years ago to concentrate on the oil-rich Eagle Ford formation in South Texas.

Penn Virginia's filing is a prearranged restructuring that will reduce the company's long-term debt of $1.2 billion by more than $1 billion. The company said that 87 percent of its noteholders agreed to the restructuring plan, which includes $128 million in exit financing and a $50 million offering of shares when the new company emerges.

The company's filings touted the prearranged exit financing as uncommon in the embattled oil exploration and production sector.

"Traditional banks have become increasingly unwilling to lend to upstream producers like the debtors under current market conditions," it said.

Penn Virginia anticipates emerging from bankruptcy by the end of the summer.

The company asked for permission to continue paying its 96 remaining employees, including retention bonuses for key executives. Most of Penn Virginia's employees are located at its Houston operational office.

Many of Penn Virginia's creditors are suppliers and contractors that did much of the company's fieldwork. The largest trade debt listed is $1.7 million owed to Patterson-UTI Drilling Co., a major drilling contractor.

The list of creditors includes $170,000 owed to the landlords of Penn Virginia's corporate headquarters, Radnor Center Associates, a subsidiary of Brandywine Realty Trust.

Penn Virginia's existing 86.5 million common shares, which traded in early 2014 at more than $17 each, on Thursday closed at about 2 cents in over-the-counter trading. Under the bankruptcy filing, equity will be "canceled, extinguished and discharged."

Penn Virginia was founded by the pioneers of Lehigh Valley anthracite coal mining, and later shifted to bituminous coal production in Pennsylvania and Virginia. In its 21st-century incarnation, it transformed itself into a shale-oil producer.

But as a late entry into the shale industry, analysts said, Penn Virginia paid higher prices for drilling rights, driving up its costs. A Moody's Investors Service comparison last August of 90 oil- and gas-exploration companies placed Penn Virginia dead last for "full-cycle costs" to produce a barrel of oil.

The bankruptcy filing was not unexpected.

After oil prices fell at the end of 2014, the company reduced operations, sold noncore assets to generate about $73 million, cut its workforce by about 40 percent from 2014 levels, and suspended preferred stock-dividend payments.

Large investors, including Soros Fund Management and Lone Star Value Management, pressed the company to find a buyer. But the company's stock continued to plummet, and the New York Stock Exchange delisted its shares earlier this year when they got stuck below $1.

After its auditors expressed doubt about its ability to continue as a "going concern," putting Penn Virginia in breach of its debt obligations, the company intensified efforts to improvise a debt-restructuring plan.

Penn Virginia's investment bank, Jefferies L.L.C., which had been exploring for potential buyers or investors since last year, arranged contacts with 16 potential third-party investors. Four made proposals.

But the rescue proposals from investors allotted Penn Virginia's creditors with "significantly" less than half of the ownership of the reorganized company. About 87 percent of the noteholders signed on to Penn Virginia's elaborate debt-for-equity restructuring agreement, according to court papers.

Penn Virginia concluded that "the consensual path contemplated by the restructuring support agreement maximizes value for all stakeholders," the company said in its filings.

Under the agreement, Penn Virginia received a commitment for $25 million in debtor-in-possession financing from lenders that, combined with the company's cash reserves and cash from operations, is expected to provide liquidity throughout the Chapter 11 reorganization process.

Penn Virginia's bankruptcy attorneys are Kirkland & Ellis of New York. Wells Fargo is the agent for the lenders. And R. Seth Bullock of Alvarez & Marsal is acting as chief restructuring officer.

amaykuth@phillynews.com

215-854-2947@maykuth

1882: A group of investors led by John Leisenring, which had been mining in the Lehigh Valley anthracite fields, forms the Virginia Coal & Iron Co. It was a holding company that owned mineral rights it leased to its companion company, Westmoreland Coal Co.

1967: Virginia Coal & Iron changes its name to Penn Virginia Co.

1994: Westmoreland Coal files for bankruptcy protection and later moves to Colorado.

2001: Penn Virginia transitions from being a holding company of mineral rights to a gas and oil producer. It hires H. Baird Whitehead, an oil-patch veteran, as chief executive.

2009: Natural gas prices begin to fall as the shale-gas boom takes off. Gas accounted for most of Penn Virginia's revenue.

2010: Penn Virginia increased its acreage position in the Eagle Ford shale formation in South Texas and began shifting from gas to oil production.

2015: Oil prices plunge worldwide because of an oversupply. Oil production is about 90 percent of Penn Virginia's revenue, and income went into a steep decline.

May 12, 2016: Penn Virginia files for Chapter 11 bankruptcy protection.

SOURCE: "In the Kingdom of Coal," by Dan Rottenberg; SEC filings