Bret Zorich joined Parkman Whaling LLC in early 2007 as co-founders Jim Parkman and Graham Whaling were launching the Houston-based investment banking and financial services firm. Commodity prices were going and blowing, and energy was one of the hottest sectors in a generally hot business environment.

During their first meeting with Zorich, the veteran founders explained their business plan and the role that he could play. “Jim basically said, when times are good, we’ll do M&A, private placements and divestitures, and when times are bad, we’ll be involved in restructurings and reorganizations. As he’s pointed out to me ever since the downturn in 2008, they had a plan,” says Zorich.

The economic turbulence of the past couple of years provided a solid education in the industry for Zorich, who began his career in New York at PaineWebber/UBS after graduating from the University of Texas with a degree in finance in 1999. He joined the health care group where he worked mainly on capital-markets projects amid the tech boom, and then M&A when the markets turned south in late 2000. He then moved to the West Coast to pursue an MBA degree at the University of Southern California.

After a several-year stint with a hedge fund/investment banking start-up in L.A., Zorich turned his eyes back to Houston. While at USC he had interned with Kayne Anderson’s private MLP fund, and by contrast, the energy sector appeared more dynamic. “I began to think the energy industry was where I wanted to be long term.”

Since joining Parkman Whaling, Zorich has been immersed largely in restructurings, with a focus in 2009 on the reorganization from bankruptcy and sale of Edge Petroleum to Mariner Energy, which closed at year-end. Mariner emerged as the high bidder in a bankruptcy auction.

In a recent interview, Zorich discussed recent deals, the industry’s resilience and lessons learned.

Investor: You’ve been busy with restructurings since joining Parkman Whaling.

Zorich: When I joined in 2007, I spent the first year rapidly climbing the learning curve on the oil and gas business. We were raising money for companies and doing divestitures. When the downturn came, I worked on the restructurings of Foothills Resources Inc., Houston, and Stormcat Energy Corp., Denver. As time went on, more classical distressed situations began to emerge, with companies that had sufficient near-term cash flow but needed time to work themselves out of the situation and find a solution.

Investor: You continued that focus into 2009.

Zorich: Yes, I spent a lot of time on the restructurings of Edge Petroleum and Clearwater Natural Resources LP, a coal company based in eastern Kentucky. They were both successful outcomes.

With Edge it took a long time and lengthy negotiations but we signed up our Stalking Horse, PGP Gas Supply Pool No. 3 LLC, in late September 2009 before Edge entered bankruptcy. In late November 2009, Mariner Energy submitted a bid of $199 million before adjustments that qualified them for the auction along with PGP’s bid of $191 million before adjustments. At the end of the auction Mariner Energy ended up purchasing Edge for $260 million before adjustments of about $24 million.

With Clearwater Natural Resources, we didn’t have a Stalking Horse, but we found two groups interested in bidding for the company. The assets were eventually sold to International Resources Partners LP in January 2010.

Investor: What is the firm working on this year?

Zorich: We have several active engagements—everything from restructurings, M&A and financial advisory services to private placements to selling assets. It’s still difficult to connect buyers with sellers. Mentally, people still haven’t recovered from the downturn and are uncertain what value to apply to assets.

Investor: You’re involved once more with a restructuring.

Zorich: Yes, I spent a good part of my time through the first half of 2010 attempting to find a Stalking Horse and taking to auction a petrochemical company that is in bankruptcy. It’s a more complicated process in that it has multiple businesses, including petrochemicals plants, a terminals business, a chemicals trading and marketing business, and undeveloped land.

Investor: What’s the mood out there right now?

Zorich: People are amazingly resilient, and they love the oil and gas business. There’s an optimism that the next deal will work out. And there’s reason to be optimistic—there are a lot of exciting things going on.

Also, I think people take comfort in the fact that pretty much everybody had a hiccup in this last cycle—with the exception of Graham Whaling—we like to tease him that everything he touches turns to gold.

Investor: Lessons learned?

Zorich: You need to know a lot about a lot. Between Jim and Graham and Tom Hensley, who heads up our restructuring practice, there’s more experience than you can imagine at the firm.
Especially with restructurings, I’ve learned you have to be anticipatory and prepared for what might happen. You have to be a leader and take charge.

—Susan Klann

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