September 1, 2009 (FinancialWire) — Baseline Oil & Gas Corp. (OTCBB: BOGA) has filed a voluntary petition for reorganization (the Chapter 11 Case) under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.

The company will continue to manage its properties and operate its businesses in the ordinary course throughout the Chapter 11 process while seeks confirmation of its reorganization plan under the jurisdiction of the Bankruptcy court.

The company was compelled to seek a restructuring as a result of its inability to repay its senior notes that had become due and payable as a result of a change of control that occurred in July 2008. A number of factors, most notably the general economic turmoil that occurred in the U.S. and global credit markets in late 2008 and early 2009, as well as steeply declining commodity prices and the company’s development drilling results, precluded from obtaining the necessary financing to repay its senior notes in accordance with their terms. At June 30, 2009, the company’s current liabilities ($138.6 million) grossly exceeded its current assets ($2.96 million).

As proceeds with its financial restructuring, expects, based on current commodity prices, that its cash on hand and cash from operating activities will be adequate to fund its projected cash needs, including the payment of operating costs and expenses. In addition to the filing of the Chapter 11 Case, asked the Bankruptcy court to consider several “first day” motions on an expedited basis benefiting its employees, royalty owners, vendors, and other service providers. Importantly, intends, under the plan of reorganization, to pay all its royalty owners, vendors and other service providers in full, whether their claims arose prior to or after the filing of the Chapter 11 cases, and to continue paying its employees’ salaries and benefits and to maintain its cash management systems.

Upon consummation of the Plan, $5 million of new capital will be provided to by way of Exit Financing provided by certain Prepetition Noteholders of the company.

Upon consummation of the Plan, all current equity will be cancelled for no consideration and will cease filing periodic and other reports with the Securities and Exchange Commission.

The Plan provides for the Prepetition Noteholders to receive securities in the reorganized Debtor, consisting of new 10% subordinated secured notes, shares of junior preferred stock and shares of new common stock. Prepetition Noteholders electing to participate in the Exit Facility will also receive new series A 20% senior secured notes new series B 20% senior secured notes and shares of senior preferred stock.

The company has retained Thompson & Knight LLP as legal counsel, and Grant Thornton LLP as financial advisor.

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