Jones Energy recently engaged Jefferies to explore strategic alternatives, said two sources familiar with the matter. The company is considering selling assets or entering into a drillco transaction that would result in bringing in external capital, the sources added.
Jones is under pressure to pursue such transactions from two activist investors, Fir Tree and Q Investments, which own 7.16% and 5.7% of the stock, respectively. Last month, Fir Tree put out a letter co-signing Q Investments’ demands for Jones to pursue a strategic process to maximize value for shareholders.
Jones is getting close to breaching its 4x maximum leverage covenant, with leverage standing at 3.84x as of 30 June. Its USD 740m capital structure comprises USD 181m of borrowings on its USD 375m revolving credit facility due 2019, its USD 409m 6.75% unsecured notes due 2022 and its USD 150m 9.25% unsecured notes due 2023.
Jones’ liquidity as of 30 June comprised USD 244m of remaining availability on its revolver. However, after receiving USD 70m of proceeds from the sale of its Arkoma assets in late June, its borrowing base was reduced from USD 425m to USD 375m.
Jones’ USD 410m 6.75% unsecured notes due 2022 last traded at 79.25 on 17 October for a 13.039% yield, down from the low 80s at the beginning of the month. The company’s stock traded at USD 1.26 today for a market cap of USD 124m, down 0.39% from yesterday’s close.
Jones Energy and Jefferies did not respond to requests for comment.