Post on 22-Jul-2018
Pro Tips for Oil & Gas Restructurings
Jay Goldfarb, PhD / Big Sky Energy Advisors
Matt Nelson / Wells Fargo Bank
Kristi Chickering / Armory Energy Partners
Hugh Ray / McKool Smith
Moderator: Allen Soong / Armory Strategic Partners
Your Panelists
Jay Goldfarb, PhDBig Sky Energy AdvisorsCo-Founder & CEO
• Transaction advisory to North
American oil & gas producers
• $2B in M&A and placements;
from $10M to $300M
• Registered broker/dealer,
FINRA member
ENERGY
Matt NelsonWells Fargo BankEVP, Head of Credit ResolutionGroup, Wholesale Banking
• 3rd-largest US bank by
assets, $1.8T
• Wholesale Banking segment
serves large and middle-
market companies
Kristi ChickeringArmory Energy PartnersCEO, Sirius Solutions
• Consulting and restructuring,
serving the energy industry
• Over 100 energy clients in 45
countries
• Over 300 professionals;
Houston, Dallas, London
Hugh RayMcKool SmithPrincipal, Head of National
Bankruptcy Practice
• National practice serving
Fortune 500 and middle
market clients, including
debtors, creditors, trustees
• Finance Monthly’s
“Insolvency and
Restructuring Firm of the
Year” in 2011 and 2012
Today’s Agenda
• Capital Markets Update – Jay Goldfarb
• OCC Handbook Changes – Matt Nelson
• Drilling Into Internal Liquidity Sources – Kristi Chickering
• Intro: So. District of Texas Bankruptcy Court – Hugh Ray
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Summary
US unconventional oil production grows 5 million b/d in five years passing Russia and Saudi Arabia to make the US the world’s top producer
US unconventional producers spend ~$130 billion /yr. on drilling and completion creating a proliferation of service, distribution and equipment manufacturing businesses on downstream value chains
Profits plunge with oil prices, cash flow is directed to debt service, companies slash investment and expenses, devastating firms on downstream value chains
Tight credit, unanticipated changes to banking regulations and restrictive debt and equity capital markets spread distress to otherwise healthy companies and inhibit a cyclical recovery
The healthiest leveraged companies are deleveraging by selling assets and raising equity while weaker companies restructure, in-or-out of court, or liquidate
The industry’s capital stack is beginning a process of migrating from the balance sheets of regulated institutions
Outspend by Category (% of Cash Flow)
2014 Total Petroleum and Liquids
HZ drilling & Fracking
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Upstream Oil & Gas Industry Top Public Issuers
Tight credit and restrictive capital markets pressure healthy firms to enhance liquidity by raising equity and cutting spending and investment.
Capital available for “haves” – no option for “have nots” other than
asset sales
Follow-on equity markets closed to issuers less than S&P “BB” – no IPO
market
Fixed income markets closed to all but investment grade issuers
Regulated Institutions – 50 to 75% of RBL energy loans are substandard or
worse
Issuer
Market
Cap. M$
Total
Enterprise
Value (M$)
Total
Debt/ LTM
EBITDA
S&P
Rating
Fixed Income
Offerings (M$)
Follow-on
Equity
Offerings (M$)
Exxon Mobil Corporation (NYSE:XOM) 389,118 433,691 1.6x AA+ 12,000 -
Chevron Corporation (NYSE:CVX) 196,292 230,921 2.6x AA- 6,800 -
Anadarko Petroleum Corporation (NYSE:APC)28,017 48,476 8.1x BBB 2,996 -
ConocoPhillips (NYSE:COP) 53,882 78,482 5.8x A- 2,994 -
Occidental Petroleum Corporation (NYSE:OXY)57,792 62,224 1.7x A 2,738 -
Total 27,527 -
Pioneer Natural Resources Co. (NYSE:PXD)25,510 26,674 3.2x BBB- - 2,219
Devon Energy Corporation (NYSE:DVN) 19,624 34,726 4.5x BBB - 1,294
Marathon Oil Corporation (NYSE:MRO) 13,291 18,500 5.3x BBB- - 1,109
EQT Corporation (NYSE:EQT) 13,703 17,941 2.0x BBB - 1,084
Hess Corporation (NYSE:HES) 18,876 22,933 3.8x BBB- 500 975
Cabot Oil & Gas Corporation (NYSE:COG) 12,011 13,035 3.4x - - 880
Antero Resources Corporation (NYSE:AR) 7,993 14,018 2.3x BB - 753
QEP Resources, Inc. (NYSE:QEP) 4,371 5,948 3.0x BB+ - 697
Newfield Exploration Co. (NYSE:NFX) 8,629 10,521 2.9x BB+ - 675
Total 500 9,686
Top 2016 Fixed Income Issuers
Top 2016 Equity Follow-on Issuers
Upstream Oil & Gas Year-to-Date June 30, 2016 Top Public Issuers
Source: S&P Capital IQ, as of July 1, 2016
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Nearly two years of falling investment has finally eliminated excess supply, but record crude inventories, a strong dollar and slow economic growth are holding back crude prices, further prolonging the industry down-cycle.
Crude Oil Supply
Capital investment has been slashed, onshore and offshore.
US Production is down 1.1 mmb./d, or 12%, year-over-yearGlobal crude markets have swung from a 2 MBD oversupply in January 2015 to a deficit and inventories are falling.
Oil prices are up 50%+ year-to-date.
Record oil storage and macroeconomic factors are restraining prices.
Stabilizing output will require $3 trillion in capex globally during the 2016 – 2020 period.
Industry raised debt capital based on $100/bbl. oil and remains over-levered at $50/bbl.
Industry is currently absorbed by balance sheet repair in an atmosphere of tightening credit.
Change in Upstream Spending
2015E2004
US Crude ProductionUS Crude Inventories
Source: J.P Morgan
Source: Bank of America
Merrill Lynch
Source: Bank of America
Merrill Lynch
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Emergence and Growth of US Unconventional Crude Supplies
2004 to 2010
Evolution of Horizontal Drilling & Fracture
Stimulation
• Technology
unlocks vast
onshore oil &
& gas reserves
reserves
• Majors stay
focused
offshore
• Independents
s explore in
ND, TX, OK,
PA, OH, WY,
LA.
2010 to 2014
Debt fueled growth led by
independent US companies
•US production
nearly doubles
•Growth nearly all
all independents
independents
(CLR, HESS, EOG
EOG & Others)
• Industry raises
nearly $1T of
debt outspending
outspending cash
cash flow by 1.8x
1.8x
•By 2014, US
overtakes Saudi
Arabia to become
become the
worlds largest
producer
2015/2016
Oversupply, commodity price
collapse and widespread
defaults
•Markets become
become
oversupplied
•Saudi Arabia sets
sets out to
destroy US shale
shale producers
•Oil prices plunge
plunge
•Asset values and
and investment
investment
decline
•Bank regulators
tighten lending
standards
US Unconventional Plays
Global Crude Production Growth
2008 2016E
Source: Tudor Pickering Holt & Co.
The current downturn is rooted in industry structural changes, precipitated by the
growth of unconventional onshore US production, led by independent exploration &
production (E&P) companies and fueled by debt.
Source: Energy Information Administration
US Unconventional Plays
US unconventional producers are capable of rapidly modulating production and have almost certainly replaced OPEC as the global swing producer which will have lasting ramifications for the industry capital stack.
Onshore Unconventional
• $5 to $10 million per well
• First production within 90 days of permitting
• 500 to 1,000 barrels/day
• High decline rate
Offshore Gulf of Mexico
• $1 billion plus per project
• Minimum 3 years from permitting to first production
• 50,000+ barrels/day
• Lower decline rate
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Exploration and Production (E&P) Investment Down-Cycle and Oil-Field Services (OFS)
E&P Companies
Rates for oil-field
services cut
CAPEX cut – freeing cash flow for debt service
Lower hydrocarbon reserve value reduces borrowing base
Raise equity, restructure debt or sell assets to de-lever
In event of insolvency, restructuring likely,
converting junior debt to equity
OFS Companies
Revenue and gross margins decline
Large share of industry employees on OFS payroll
– Headcount Reduced
Equipment idle – little value for used equipment
Debt service consumes cash flow
In event of insolvency, senior debt impaired and
liquidation likely
Commodity Price
E&P Asset Value
E&P Capital Investment
Upstream Service Rates
Upstream Service
Capacity
Oil & Gas Production
Managing The Down-CycleUpstream Investment Cycle
Exploration and production (E&P) firms survive down-cycles by reducing CAPEX to free
cash flow for debt service. Reduced upstream investment eliminates a key source of
revenue for the oil field service (OFS) segment leaving these firms unable to service debt.
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Oil & Gas Capital Markets
Sources: S&P Capital IQ, OCC 2015 Shared National Credit Review and internal estimates
Over the last five years, many industry firms investing in shale have accessed billions of dollars in public debt markets in unsecured notes, significantly increasing their total leverage.
Source: J.P. Morgan
2015 CAPEX survey
National oil companies (NOCs) and international oil companies (IOCs) like ARAMCO and Shell are responsible for the majority of global crude production. Replacing their existing reserves accounts for the majority of global spending.
NOCs and IOCs fund from cash flow and their capital structures include debt raised in fixed income markets.
Growing independent oil companies substantially outspent cash flow and raised growth capital from senior debt, private equity, public equity offerings and ~$300B from high-yield bonds.
Growth of the independent exploration sector spawned a proliferation of independent service companies focused on particular geographies, customers and services.
US Upstream Capital Market Activity since 2010
$160BPrivate Equity
$200B
Public Equity Offerings
$354B
Bank Loans
$600B
Fixed Income Securities
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Debt Capacity the Exploration & Production Industry
Ratio PassSpecial
Mention
Substandard or
Worse
DefinitionPotential
Weakness
Well-defined
Weaknesses
Funded
Debt/EBITDAX<3.5X 3.5-4.0X >4.0X
Funded
Debt/(Funded
Debt + Equity
Capital)
<50% 50-60% >60%
Committed
Debt/Un-risked
& Undiscounted
Proved
Reserves
<65% 65-75% >75%
EBITDAX is defined as earnings before interest, taxes, depreciation and amortization
with depletion, exploration, and abandonment expenses added back.
Energy lenders participate in senior loans secured by the oil & gas reserves of public debt
issuers. Senior debt exposes these firms to borrowing base redeterminations and
changing credit standards imposed by regulatory agencies.
OCC March 2016 Guidelines for Oil and Gas
Lending2009 to
2010
• Oil plunges from $130/bbl. to $30
• E&P firms with senior debt sell assets or raise equity to cure borrowing base deficiencies.
2011 to 2014
• Larger firms increase leverage by issuing high-yield unsecured bonds and utilize revolver availability as a source of liquidity.
2015
• Borrowing base redeterminations cause defaults for firms with funded senior debt.
• High borrowing costs cause defaults for firms funded by high-yield bonds.
2016
• Firms look to undrawn revolvers for liquidity but pressure from regulators cause banks to restrict availability forcing more defaults.
• Restrictive guidelines for banks discourage holding sub-standard loans through the cycle, pressuring borrowers to sell assets or raise equity.
• In the event of restructuring, junior debt typically owns the firm.
Presentation for educational purposes only; not a recommendation for a particular security or investment strategy
Oil & Gas Capital Markets
Availability of Capital for the US Upstream Oil & Gas Industry
Senior Debt
• Tight standards limit
direct lending
• New loans participating in
participating in PE deals
deals
• Weaker borrowers require
require PE backing
• Regional banks above 5%
5% portfolio limit for oil &
oil & gas lending
• Non-bank lenders costly
costly for lower quality
borrowers
Bonds
•Low rates and long
duration highly
attractive to investment
investment grade
issuers
•High-yield spreads
close markets to
speculative issuers
Private Equity
•$150B+ dry powder
•Most active acquirer of
of industry assets
•Sponsor mgmt. teams
teams hunting for
assets
•Sponsor emerging
growth companies with
with control equity
•Joint Venture
participation with
established operators
operators
Public Equity
•Stock prices up
significantly year-to-
date
•2016 follow-on market
market active for
issuers with BB
minimum
•June 22, 2016, 1st E&P
E&P IPO in more than a
than a year
Industry capital is moving off the balance sheets of regulated institutions. The primary
sources of capital are asset sales, issuing public equity, private equity and unregulated
lenders.
Today’s Agenda
• Capital Markets Update – Jay Goldfarb
• OCC Handbook Changes – Matt Nelson
• Drilling Into Internal Liquidity Sources – Kristi Chickering
• Intro: So. District of Texas Bankruptcy Court – Hugh Ray
OCC Handbook
• In March 2016, the OCC published updated guidance to
banks regarding oil and gas lending.
• The publication is called Comptroller’s Handbook: Oil and
Gas Exploration and Production Lending.
• It is publicly available. See
http://www.occ.gov/publications/publications-by-
type/comptrollers-handbook/pub-ch-og.pdf
Discussing OCC Guidelines on Risk Rating
Classifications
Assigning Regulatory Loan Ratings
• The OCC reorganized this section to more clearly lay out the criteria for the various loan ratings, though it cautioned that these criteria are not meant to be construed as bright linesPass Special Mention Substandard / Doubtful Loss
Repay Committed Bank Debt from operating cash flow <60% of Reserve Life >60% < 75% of Reserve Life > 75% of Reserve Life > 100% of Reserve Life
OR
Repay Total Secured Debt from operating cash flow <75% Reserve Life >75% < 90% of Reserve Life > 90% of Reserve Life > 100% of Reserve Life
Funded Debt / EBITDAX ≤ 3.5x > 3.5x ≤ 4.0x > 4.0x N/A
Funded Debt / (Funded Debt + Equity) ≤ 50% > 50% ≤ 60% > 60% N/A
Committed Debt / Total Unrisked Undiscounted 1P Cash Flow ≤ 65% > 65% ≤ 75% > 75% ≤ 100% > 100%
Special Mention Rating Classifications
• Borrower has a potential weakness – if uncorrected, could lead to
a well defined weaknesses and deterioration in the repayment
capacity
• Continued financial underperformance to management’s plan
• Advance rates or reserve mix category exceeds policy limits or
industry standards
• Liquidity and cash flow begin to deteriorate and are marginally
sufficient in funding projected operations or capital plan
• Continued history of an over-advanced borrowing base
Substandard Rating Classifications • A substandard RBL is inadequately protected by the current paying
capacity of the borrower
• Borrower has a well defined weakness leading to a higher probability of a payment default
• Borrower continues to be in covenant default with need of an amendment to reset or restructure the loan
• Operational cash flow has significantly deteriorated and total debt repayment is insufficient
• The borrower’s total committed debt is greater than 75% of the total unrisked and undiscounted proved reserves
• The borrower may be dependent on asset sales or other secondary sources of repayment to repay debt
Non-Accrual Designation
• A loan should be moved to non-accrual in the event that:
• Payment of full principal or interest is not expected; or
• Principal or interest have been in default for greater than 90 days
• In cases with multiple loans to the borrower, structured as
pari-passu and supported by same underlying assets, a
designation to non-accrual should carry across all of the
loans
Doubtful Loan Rating Classifications
• The remaining balance of a borrowers loan secured by the
NPV of unrisked proved reserves should be classified
doubtful when the potential for full loss may be mitigated by
the outcome of certain pending events
• A doubtful rating is also warranted when a loss is expected,
but an amount cannot be reasonable determined
• The borrower’s loan balance should not exceed 100% of the
unrisked NPV of proved reserves
Deriving a Loss
• The portion of the loan balance that exceeds 100% of the
unrisked NPV of proved reserves, and is deemed
uncollectible, should be classified as a loss
Updated Lending Guidance
Updated E&P Lending Structure
• Standard Revolver terms reduced from 3-7 years to 3-5
years
• OCC now specifies typical covenants necessary for RBLs,
which include the following
– Maximum Sr. Funded Debt or Total Debt / TTM EBITDA(X) at 3.5x
and 4.0x, respectively;
– Minimum TTM EBITDA(X) / Interest Expense of 2.5-3.0x; and
– Minimum Current Ratio of 1.00-1.25x
Establishing the Borrowing Base
• New OCC guidance states that banks should perfect liens
on reserves representing 75-90% of economic value in the
borrowing base
• Single well concentration should not exceed 15-20% of the
borrowing base
• Non-Producing reserves should be limited to 25-35% of the
borrowing base valuation
Establishing the Borrowing Base (cont.)
• Borrowing bases should be reset every six months based
upon updated engineering
• Borrowers are required to cure any over-advance /
deficiency in equal payments evenly over six months and
that the next subsequent borrowing base will be conforming
• An over-advance does not result in an adverse rating
Risking of Reserves
• The OCC enhanced its guidance regarding the risking of reserves
in connection with each borrowing base redetermination
Previous OCC Guidance New OCC Guidance
• Borrowing base should be based primarily on PDP reserves with at least 6 months of production history
• No other specifications on appropriate risking methodology of non-producing reserves
• 100% of seasoned (producing ≥ 6 months) PDP reserves
• 90-95% for unseasoned (producing < 6 months) PDP reserves
• 65-70% for PDNP reserves• 25-50% of PUD reserves
Leveraged Lending / Repayment
Requirements
• Modified the repayment test used for Leveraged Loans
relating to RBLs
• Ability to repay an RBL is assessed relative to the economic life of
the reserves as opposed to the 5-7 year test previously used in
connection with the general Leveraged Lending guidance
• Repayment of an RBL’s commitment should occur within 60% of the
economic life of the reserves (or 120% of the reserves’ ½ life) and
within 75% of the economic life for total debt
Today’s Agenda
• Capital Markets Update – Jay Goldfarb
• OCC Handbook Changes – Matt Nelson
• Drilling Into Internal Liquidity Sources – Kristi
Chickering
• Intro: So. District of Texas Bankruptcy Court – Hugh Ray
Objective & Agenda
Objective:
Share our learnings on identifying internal liquidity sources, focusing on cost
reductions.
Agenda:
1. Case Study 1: Reductions in Human Capital and Third-Party Spend
2. Case Study 2: Reductions in G&A and Lease Operating Expenses
Case Study 1: Publicly Traded Midstream MLPReductions in Human Capital and Third-Party Spend
TRIGGER EVENT:Client estimated
bankruptcy risk in their client base
1. Cost Reduction Objective =$10M (end of Q1) +
$10M (run rate) (end of Q2)
1. Framed Objective2. Determined Feasibility3. Identified Key Actions4. Established Timeline
2. Feasibility =Reduce Human Capital +
Third-Party Expenses
3. Key Actions =Identified by Sirius Multi-
Disciplined Team in collaboration with Sr. Mgmt.
Hired Sirius
Mid-Feb. 2015
4. Complete by Q2 2015 close
Case Study 1: Publicly Traded Midstream MLPPhase 1: Focus on Human Capital Cost Reduction
Actions:1. Flash reporting developed indicating timing of key HR
expense components2. Essential outputs by individuals determined3. Based on above, executed reduction in human capital
Feb. 28Mid-Feb.
Cost Reduction Objective =$10M (end of Q1)
March 31
Cost Reduction Impact =$17M (end of Q1)
Case Study 1: Publicly Traded Midstream MLPPhase 2: Focus on Reduction in Third-Party Expenses
Actions:1. Mapped spend by vendor (type, timing)
over prior 12 months2. Determined opportunities (e.g. rate
renegotiations)3. Renegotiated or eliminated contracts
Feb. 28Mid-Feb.
Cost Reduction Objective = run rate of $10M (end of Q2)
April 1
Cost Reduction Impact =run rate $27M (end of Q2)
June 1
Case Study 1: Publicly Traded Midstream MLPReductions in Human Capital and Third-Party Spend
1. Frame Objective2. Determine Feasibility3. Identify Key Actions4. Establish Timeline
APPROACH
1. Data Analysts2. Cost Analysts3. Forecasters4. LEAN Six Sigma Black
Belts5. Facilitators
MULTI-DISCIPLINED TEAM
Cost Reductions of $44MM
(220% of goal)
Case Study 2: Publicly Traded Off-Shore
Upstream Energy Company Reductions in G&A and Lease Operating Expenses
TRIGGER EVENT:Client was concerned
about the decline in the commodity price plus the amount of debt they were carrying; together these put them into a potential
bankruptcy situation
1. Quickly gain visibility into key expenses in order to
reduce overall costs, improve liquidity and service debt1. Framed Objective
2. Determined Feasibility3. Identified Key Actions4. Established Timeline
2. Feasibility =Reduce LOE and G&A
3. Key Actions =Identified by Sirius Multi-
Disciplined Team in collaboration with Sr. Mgmt.
Hired Sirius end of Nov. 2014
4. Complete by Q1 2015 close
Case Study 2: Publicly Traded Off-Shore Upstream
Energy Company Phase 1: Focus on G&A Reductions
Actions:1. Developed data hierarchies 2. Extracted data from multiple functional areas and systems3. Created a separate database to capture the data and
developed automated, dynamic, customized reporting; enabled diverse user base to drill down via user-friendly interface
Dec. 1End of Nov. 2014
Gain visibility in 30 days into detailed G&A expenses in order
to identify where to reduce
Dec. 31
Cost reduction actions taken using this operational reporting and cost analytics resulted in a
36% Reduction in 2015 G&A
Time to analyze costs reduced from 4-6 months post-
spend to real time
Case Study 2: Publicly Traded Off-Shore Upstream
Energy Company Phase 2: Focus on Reduction in Lease Operating Expenses
Actions:1. Extracted data from five different technology systems2. Created a separate LOE database and reporting system
that enabled the production of P&L statements, in real time, for each well
Dec. 1End of Nov. 2014
Gain visibility in 6 weeks into the profitability and expense of each
of the firm’s 2,500 wells
Mid-Feb 2015
Cost reduction actions taken using this operational reporting and cost analytics resulted in a
30% Reduction in 2015 LOE
Time to analyze costs reduced from 4-6 months post-
spend to real time
Jan. 1
Case Study : Publicly Traded Off-Shore Upstream
Energy Company Reductions in G&A and Lease Operating Expenses
1. Frame Objective2. Determine Feasibility3. Identify Key Actions4. Establish Timeline
APPROACH
1. Data Hierarchists and Extractors
2. Database Architects3. Upstream Oil & Gas
Analysts4. Operational Reporting
Experts5. Process Improvement
Professionals
MULTI-DISCIPLINED TEAM
Cost Reductions of 30% for LOE +36% for G&A
In 2015
Development of real-time operational
reporting enabling ongoing efficiencies
Where Companies
Are
Where Companies
Must Be
Closing Thought
Today’s Agenda
• Capital Markets Update – Jay Goldfarb
• OCC Handbook Changes – Matt Nelson
• Drilling Into Internal Liquidity Sources – Kristi Chickering
• Intro: So. District of Texas Bankruptcy Court – Hugh
Ray
North American Energy Bankruptcy Filings,
January 2015 through June 2016
Source: Houston Business Journal, July 2016
0
5
10
15
20
25
Nu
mb
er o
f fi
lings
Total = 156
North American Energy Bankruptcy Filings,
January 2015 through June 2016
Source: Houston Business Journal, July 2016
14
233
81
35
Canada
Delaware
New York
Texas
Other
Number of Filings, No. AmericaTotal = 156
Number of Filings, TexasTotal = 81
4
24
19
34
0 10 20 30 40
Eastern
Western
Northern
Southern
Value of Filings, TexasTotal = $27.0B
$0.1
$1.9
$2.0
$23.1
$- $10.0 $20.0 $30.0
Eastern
Western
Northern
Southern
COMPANY DATE $MM
Aurora Operating LLC 1/11 $2.4
MOG Producing LP 1/18 $4.3
Ginger Oil Company 2/4 $6.5
Argent Energy (U.S.) Holdings Inc. 2/17 $51.9
Primrose La Sara LLC 2/17 $4.3
Wellhead Distributors Intl 3/4 $31.7
ESP Petrochemicals, Inc. 3/10 $7.4
East African Drilling Ltd. 3/25 $45.4
Hydrocarb Energy Corporation 4/13 $12.5
Aztec Oil & Gas Inc. 4/13 $1.5
Energy XXI Ltd. 4/14 $2.8B
So. Dist. of Texas Energy Bankruptcy Filings,
2016 YTD
Source: Houston Business Journal, July 2016
COMPANY DATE $MM
Goodrich Petroleum Corporation 4/15 $444.2
Ultra Petroleum Corporation 4/29 $3.9B
Midstates Petroleum Co. Inc. 4/30 $2.0B
Linn Energy LLC 5/11 $6.0B
Berry Petroleum Company LLC 5/11 $1.7B
SandRidge Energy Inc. 5/16 $4.2B
Hawk Oilfield Service Inc. 5/17 $1.2
Armada Water Assets/Wes-Tex Vacuum Service 5/23 $24.9
Mark A. Martinez LLC 5/24 UNK
Linc USA GP 5/29 $414.4
Warren Resources Inc. 6/2 $486.3
Summary
• As of March 3, 2016, Judge Marvin Isgur and Judge David Jones will hear all of the
Chapter 11 Cases designated as “complex”.
• The threshold for “complex” is very low--$10 Million in debt.
• Complex cases can be self-set for hearing (even emergency hearings) on any day of
the week.
• Overall, Delaware and New York remain more hospitable to structured dismissals or
section 363 sales followed by conversion than the Southern District of Texas.
• Sub rosa plans
• Texas is more favorable towards involuntary filings and allowing committees to bring
estate causes of action.
Judge Marvin Isgur
• Business background (MBA); successfully operating real estate ventures and teaching
business courses at the University of Houston.
• He stated his ultimate goal was to become a bankruptcy lawyer.
• After the ATP Oil and Gas case, Judge Isgur has refused to sign a “traditional” cash
collateral/DIP order. Instead, he signs a simple order that he himself types in open court.
• DIP Loans receive DIP protections for new money only.
• The United States Trustee counsel for Judge Isgur’s cases is retiring to Wisconsin soon.
Judge David Jones
• Judges Isgur and Jones practiced law together.
• Judge Jones was active in the tech industry and made a second career of the practice
of law.
o Evidentiary rules
• In contraposition to Judge Isgur, Judge Jones will sign complex cash collateral/DIP
Orders that include “roll-up” of prepetition debt and strict default triggers.
• Like Judge Isgur, Judge Jones will expect a DIP Loan to provide the opportunity for a
plan confirmation.
• Select by filing a case in the Victoria Division.
o No one has yet challenged the divisional selection of Victoria in a complex chapter 11.
• United States Trustee
• Fees
• Mediation
- Both favor mediation and will often mediate each other’s cases.
• Section 503(b) substantial contribution claims
• Non-Debtor releases
Bankruptcy Practice
Q&A