Voluntary Reorganization under Chapter 11 of the Bankruptcy Code

9 Months Ended

Sep. 30, 2020

Voluntary Reorganization under Chapter 11 of the Bankruptcy Code

Due to the volatile market environment that drove a severe downturn in crude oil and natural gas prices in the first quarter of 2020, as well as the unprecedented impact of the novel coronavirus 2019 (“COVID-19”) pandemic, the Company began evaluating, with support from its Board of Directors, a variety of transactions and cost-cutting measures, including but not limited to, reductions in capital expenditures and corporate discretionary expenditures, refinancing transactions, capital exchange transactions, asset divestitures and operational efficiencies. During the second quarter of 2020, the Company engaged advisors to assist with the evaluation of strategic transactions and restructuring alternatives to reduce the Company’s debt, increase financial flexibility and position the Company for long-term success. On September 29, 2020, Oasis Petroleum Inc. and its affiliates Oasis Petroleum LLC (“OP LLC”), OPNA, Oasis Well Services LLC, Oasis Petroleum Marketing LLC, OP Permian, OMS Holdings LLC, OMS and OMP GP LLC (“OMP GP”) (collectively, the “Debtors”) entered into the Restructuring Support Agreement (the “RSA”), which contemplates a restructuring pursuant to the Joint Prepackaged Chapter 11 Plan of Reorganization of Oasis Petroleum Inc. and its Debtor Affiliates (the “Plan”). On September 30, 2020 (the “Petition Date”), the Debtors filed voluntary petitions (the “Chapter 11 Cases”) for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Chapter 11 Cases are being jointly administered under the caption In re Oasis Petroleum Inc., et al, Case No. 20-34771. OMP and its subsidiaries, OMP Operating LLC, Bobcat DevCo LLC (“Bobcat DevCo”), Beartooth DevCo LLC (“Beartooth DevCo”), Bighorn DevCo LLC (“Bighorn DevCo”) and Panther DevCo LLC (collectively, the “Non-Filing Entities”), are not included in the Chapter 11 Cases.

The Debtors continues to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. On the Petition Date, the Bankruptcy Court entered orders approving certain customary first-day relief to enable the Company to operate in the ordinary course of business during the Chapter 11 Cases, including authorizing payment of employee wages and benefits, owner royalties and vendor obligations for goods and services provided on or after the Petition Date, as well as approving on an interim basis post-petition financing under a debtor-in-possession credit facility (see “DIP Facility” below).

The filing of the Chapter 11 Cases constituted an event of default that accelerated the Company’s obligations under the Third Amended and Restated Credit Agreement dated as of October 16, 2018, as amended through the Fourth Amendment dated April 24, 2020, by and among Oasis Petroleum Inc., as parent, OPNA, as borrower, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent (the “Pre-Petition Credit Facility”) and its senior unsecured notes, including (a) 6.50% senior unsecured notes due 2021, (b) 6.875% senior unsecured notes due 2022, (c) 2.625% senior unsecured convertible notes due 2023, (d) 6.875% senior unsecured notes due 2023 and (e) 6.250% senior unsecured notes due 2026 (collectively, the “Notes” and, together with the Pre-Petition Credit Facility, the “Debt Instruments”). The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.

Restructuring Support Agreement

On September 29, 2020, the Debtors entered into the RSA with (i) certain lenders (the “Consenting RBL Lenders”) holding approximately 97% of the revolving loans under the Pre-Petition Credit Facility and (ii) certain debtholders (the “Consenting Noteholders” and, together with the Consenting RBL Lenders, the “Consenting Stakeholders”) holding approximately 52% of the Company’s Notes. Subsequent to the Petition Date, creditor support for the RSA increased to Consenting RBL Lenders comprising 100% of the lenders under the Pre-Petition Credit Facility and Consenting Noteholders holding 58.8% of the Notes.

The RSA contains certain covenants on the part of each of the Debtors and the Consenting Stakeholders, including commitments by the Consenting Stakeholders to vote in favor of the Plan and commitments of the Debtors and the Consenting

Stakeholders to negotiate in good faith to finalize the documents and agreements contemplated by and required to implement the Plan. The RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including without limitation, the failure to achieve certain milestones and certain breaches by the parties under the RSA. There is no guarantee that the RSA can be successfully implemented or that the Plan will be approved.

The deadline for holders of impaired claims and interests entitled to vote (the “Voting Classes”) with respect to the Plan was November 2, 2020, and all three Voting Classes voted to accept the Plan. The Company expects the Bankruptcy Court to confirm the Plan at the confirmation hearing scheduled for November 10, 2020 and that the Plan will become effective and consummated shortly thereafter.

Plan of Reorganization under Chapter 11 of the Bankruptcy Code

Below is a summary of the treatment that the stakeholders of the Company would receive under the Plan:

•Holders of Other Secured Claims. Each holder of an allowed Other Secured Claim (as defined in the Plan) shall receive, at the option of the applicable Debtor and in its sole discretion: (a) payment in full in cash of its allowed Other Secured Claim; (b) the collateral securing its allowed Other Secured Claim; (c) reinstatement of its allowed Other Secured Claim; or (d) such other treatment rendering its allowed Other Secured Claim unimpaired in accordance with section 1124 of the Bankruptcy Code;

•Holders of Other Priority Claims. Each holder of an allowed Other Priority Claim (as defined in the Plan) shall receive treatment in a manner consistent with section 1129(a)(9) of the Bankruptcy Code;

•Holders of RBL Claims. Each holder of an allowed RBL Claim (as defined in the Plan) (i) electing to participate in the Exit Facility (as defined below) by entry into the Exit Commitment Letter (as defined below) will receive, (x) on a dollar-for-dollar basis in exchange for the portion of its RBL Claim representing the principal of the loans owed to such lender under the Pre-Petition Credit Facility, an equal amount of the principal of the revolving loans under the Exit Facility as of the Plan effective date, upon the terms and conditions set forth in the Exit Facility Term Sheet (as defined below) and (y) with respect to any other portion of such holder’s RBL Claim (to the extent not already paid prior to the Plan effective date, including as adequate protection pursuant to the DIP Orders (as defined in the Plan)), cash in an amount equal to such portion of such holder’s RBL Claim, and (ii) not electing to participate in the Exit Facility by electing not to sign the Exit Facility Commitment Letter (x) shall be deemed to have funded a second out term loan on a dollar-for-dollar basis in exchange for the portion of its RBL Claim representing the principal of the loans owed to such lender, any of such holder’s Specified Default Interest (as defined in Note 11 — Long-Term Debt) and any unreimbursed claims for professional fees and expenses under the Pre-Petition Credit Facility and (y) with respect to any other portion of such holder’s RBL Claim (to the extent not already paid prior to the Plan effective date, including as adequate protection pursuant to the DIP Orders), cash in an amount equal to such portion of such holder’s RBL Claim. The liens securing the loans under the Pre-Petition Credit Facility shall be retained and deemed assigned to the administrative agent under the Exit Facility to secure the Exit Facility upon the Plan effective date. Notwithstanding the foregoing, on the Plan effective date, any Specified Default Interest shall be discharged, released and deemed waived by all Consenting RBL Lenders;

•Holders of Notes Claims and Mirada Claims. Class 4 consists of all Notes Claims (as defined in the Plan) and Mirada Claims (as defined in the Plan). Each holder of an allowed Notes Claim or an allowed Mirada Claim shall receive its pro rata share (calculated based on the aggregate amount of all allowed Notes Claims and allowed Mirada Claims) of 100% of the reorganized Company’s equity interests, subject to dilution on account of the management incentive plan and the New Warrants (defined below); provided, that notwithstanding that the Mirada Claims are classified as Class 4 claims, such claims, in lieu of any treatment as Class 4 claims, shall be treated in accordance with the Mirada Settlement Agreement (as defined in Note 17 — Commitments and Contingencies);

•Holders of General Unsecured Claims. Each holder of an allowed General Unsecured Claim (as defined in the Plan) shall receive, at the option of the applicable Debtor: (a) payment in full in cash; or (b) reinstatement;

•Holders of Intercompany Claims. Each allowed Intercompany Claim (as defined in the Plan) shall be, at the option of the applicable Debtor, either: (a) reinstated; or (b) cancelled, released, and extinguished and without any distribution at the Debtors’ election and in their sole discretion;

•Holders of Interests Other Than in Oasis. Each holder of an Interest (as defined in the Plan) in the Debtors other than in Oasis shall have such Interests either: (a) reinstated; or (b) cancelled, released, and extinguished and without any distribution at the Debtors’ election and in their sole discretion; and

•Equity Holders. Each holder of an Interest in Oasis shall receive its pro rata share of four-year warrants convertible into 7.5% of the reorganized Company’s equity interests at a strike price equal to the aggregate amount of Notes Claims (the “New Warrants”).

DIP Facility

On September 29, 2020, prior to the commencement of the Chapter 11 Cases, the Consenting RBL Lenders agreed to provide the Debtors with a senior secured superpriority debtor-in-possession revolving credit facility pursuant to a commitment letter entered into by and among the Debtors and certain of the Consenting RBL Lenders and/or their affiliates. The Bankruptcy Court approved the Interim DIP Order (as defined in the Plan) on September 30, 2020, and on October 2, 2020, the Debtors entered into a Senior Secured Superpriority Debtor-in-Possession Revolving Credit Agreement (the “DIP Facility”), which provides for a debtor-in-possession revolving credit facility in an aggregate principal amount of $450 million consisting of (a) $150 million new money revolving credit facility ($100 million of which amount may also be used for the issuance of new letters of credit or deemed reissuance of pre-petition letters of credit) and (b) up to $300 million roll-up of pre-petition secured indebtedness under the Pre-Petition Credit Facility. See Note 11 — Long-Term Debt for further details.

Exit Financing

On September 29, 2020, prior to the commencement of the Chapter 11 Cases, the Company entered into a commitment letter (the “Exit Commitment Letter”) with the Consenting RBL Lenders and/or their affiliates, which provides for an exit revolving credit facility (the “Exit Facility”) with borrowing capacity up to $575 million on the terms set forth in the exit facility term sheet (the “Exit Facility Term Sheet”) attached to the Exit Commitment Letter. See Note 11 — Long-Term Debt for further details.

Executory Contracts

Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such contract and, subject to certain exceptions, relieves the Debtors from performing future obligations under such executory contract or unexpired lease but entitles the counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtors herein, including where applicable quantification of the Company’s obligations under such executory contract or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. As of September 30, 2020, the Company has not assumed or rejected any executory contracts.

Liabilities Subject to Compromise

The Company’s Condensed Consolidated Balance Sheet as of September 30, 2020 includes amounts classified as liabilities subject to compromise, which represent pre-petition liabilities that the Company anticipates will be allowed as claims in the Chapter 11 Cases, although they may be settled for less. The Company will continue to evaluate these liabilities throughout the Chapter 11 Cases and adjust amounts as necessary. Such adjustments may be material.

The following table summarizes the components of liabilities subject to compromise:


	September 30, 2020

	(In thousands)
Accounts payable and accrued liabilities	$	113,287

Senior unsecured notes	1,825,757
Accrued interest on senior unsecured notes	50,337

Asset retirement obligations	57,306
Other liabilities	24,171
Total liabilities subject to compromise	$	2,070,858

The Company reclassified its Notes to liabilities subject to compromise and discontinued recording interest on its Notes as of the Petition Date. The contractual interest expense on the Notes not accrued in the Company’s Condensed Consolidated Statements of Operations was $0.3 million.

Reorganization Items

The Company has incurred and will continue to incur significant costs as a direct result of the Chapter 11 Cases subsequent to the Petition Date. These costs, which are expensed as incurred, and any income, gains or losses directly associated with the Chapter 11 Cases are recorded in reorganization items, net in the Company’s Condensed Consolidated Statements of Operations. During the periods presented, reorganization items consist of non-cash charges to write-off unamortized deferred

financing costs and debt discount related to the Company’s Notes, which are expected to be impacted by the Chapter 11 Cases.

The following table summarizes the components of reorganization items, net:


	Three and Nine Months Ended
	September 30, 2020

	(In thousands)
Write-off of unamortized deferred financing costs	$	11,385
Write-off of unamortized debt discount	38,373
Total reorganization items, net	$	49,758