In early 2016, a consortium of five national banks selected an affiliate of Cardinal River Energy Co. to provide independent advice concerning issues that were affecting one of the consortium’s borrowers. The borrower was facing serious financial distress and credit related problems, and subsequently filed for bankruptcy protection. After the filing, Cardinal River continued to provide advice and consulting services to the national bank group. This eventually led to the formation of River Rock Energy Company, which was formed to assist the banks in making a successful credit bid for substantially all of the borrower’s assets.
Under a collaborative arrangement with the bank group, River Rock Energy was assigned over 2,500 producing wells, associated leases and a multi-state gas gathering system. As a part of the transaction, River Rock Operating, LLC assumed operations of all of the wells. River Rock Energy and River Rock Operating are the culmination of the strategic advice and assistance provided by Cardinal River Energy to the banks. This strategy was predicated on the following:
(1) As advisors to the bank group, Cardinal River would not bid on the bankrupt entity’s assets if the bid would be adverse to the bank group’s position; and,
(2) Cardinal River would only seek consulting fees or compensation for its services if it could add value to the bank group’s goal of maximizing its recovery from the bankrupt estate.
Cardinal River continues to provide management services in connection with the ownership and operation of the foregoing assets. On a selective basis, Cardinal River provides consulting and management services to lenders with respect to problem loans and the assets that secure such loans. As part of such arrangements, Cardinal River also considers longer term asset ownership and operating services under mutually acceptable agreements with the lenders.