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Successful Restructuring of an Oil Field Service Company

Particle Drilling Technologies, Inc., based in Houston, Texas, is an oilfield service company in the process of commercializing its patented advanced drilling technology known as Particle Impact Drilling (PID). The purpose of the PID System is to significantly reduce the time and cost of drilling hard rock or other difficult to drill formations. The company was publicly‐held from 2004 through May of 2009, and has operated since 1993. Deteriorating capital markets, costly financing and weak financial management were driving Particle’s cash burn and the Lehman bankruptcy and credit crunch accelerated the decline. When a private equity group called Accumyn’s David Eliff, the situation was grim:

The company was out of cash and its bank account was overdrawn.
Accounts receivable were fully factored, and inventory values were insignificant.
There was no visible liquidity or additional borrowing capacity.
Payables averaged 106 days. Suppliers were threatening COD and/or legal action.
Liquidation would realize 26 percent for the secured debt.

With a viable core business and technology, a loyal and strong customer base, and an ample market size and potential for huge gross margins, Mr. Eliff and his team concluded that Particle could succeed. Efficiency, machining know‐how, delivery and customer service were excellent and Management and key employees were willing and capable to make the necessary changes to allow the organization to be mobilized and led; however, adequate bridge financing was a problem. The solution became apparent after meeting with a major private equity firm who agreed with Mr. Eliff’s market assessment of the PID. Outstanding results were achieved:

A majority of all jobs were preserved.
Shell Oil and Encana remained champions of the Technology; the customer base remained intact.
Bank credibility and trust was restored; the secured debt realized a 100 percent recovery.
Expenses were cut by 43% from the previous 6 months.
A plan of reorganization and a disclosure statement has been approved and PDTI Holdings, LLC will purchase the assets and exit bankruptcy in less than 90 days.
Legal and other professional fees are less than $200,000.

Mr. Eliff will continue with PDTI Holdings the new owner of the company, as the interim Chief Financial Officer with his focus on operational and financial improvements to facilitate the commercialization of the PID units in North America.