memorandum in support of century exploration objection 6-12-13.pdf

7/28/2019 memorandum in support of century exploration objection 6-12-13.pdf

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UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF LOUISIANA

In re:

CASE NO. 11-13028

VIRGIN OFFSHORE USA, INC.SECTION A

I nvoluntary Debtor

CHAPTER 11

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MEMORANDUM IN SUPPORT OF CENTURY EXPLORATION NEW ORLEANS, LLCS

OBJECTION TO FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED

MARCH 28, 2013, PROPOSED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE

FOR THE ESTATE OF VIRGIN OFFSHORE USA, INC.

MAY IT PLEASE THE COURT:

This memorandum is respectfully submitted by undersigned counsel and on behalf of Century

Exploration New Orleans, LLC f/k/a Century Exploration New Orleans, Inc. (Century

Exploration), in support of its Objection to First Amended Chapter 11 Plan of Reorganization [P-

428] (Objection),for the following reasons:

I. FACTSCentury Exploration and the Trustee in the captioned case are parties to certain executory

contracts, including, but not limited to, a Joint Development Agreementand an Offshore Operating

Agreement, pertaining to the exploration, development, production and operation of oil and gas leases

covering certain submerged lands offshore from the State of Louisiana in the Gulf of Mexico known

as the Ship Shoal area. Century Exploration is the Operator under these agreements. The Trustee has

not yet assumed these executory contracts but seems to say in his Plan that he is doing so through the

Plan.

Attached to the Objection, as Exhibit 1, is the most recent estimate by Century Exploration of

the P&A liability for both currently producing wells and those which are not producing for the parties

Case 11-13028 Doc 429 Filed 06/12/13 Entered 06/12/13 16:13:27 Main DocumentPage 1 of 6


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to the Ship Shoal agreements. The Debtors share totals $1,047,217. Of that amount, the Debtors

share of P&A liability for wells which have already ceased production is roughly $414,000.

II.

LAW AND ARGUMENT

Century Exploration shows the Trustee has not met his burden of proving that he will provide

adequate assurance of future performance with regard to his P&A liabilities under the executory

contracts. Also, his method of cure for pre-petition default is not prompt.

The Trustee has the burden of proof to show assurance of future performance in addition to

cure and compensation for prior defaults. In re Texas Health Enterprises Inc., 72 F. App'x 122, 126

(5th Cir. 2003). The question of whether the trustee has met his burden is a fact-intensive

question governed by commercial reality to determine whether the debtor's financial data indicated

its ability to generate an income stream sufficient to meet its obligations, the general economic

outlook in the debtors, including consider[ation of] whether the debtors financial data industry,

and the presence of a guarantee. Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303,

1309-10 (5th Cir. 1985); In re Liljeberg Enterprises, Inc., 304 F.3d 410, 438-39 (5th Cir. 2002)

([T]o determine if the debtor in possession has provided adequate assurance of future

performance, we have held that courts must look to factual conditions indicated its ability to

generate an income stream sufficient to meet its obligations, *439 the general economic outlook in

the debtors industry, and the presence of a guarantee.);In re Patriot Place, Ltd., 486 B.R. 773, 801

(Bankr. W.D. Tex. 2013) (According to the Fifth Circuit, what constitutes adequate assurance of

future performance is extremely fact-specific.In re Texas Health Enterprises Inc., 72 Fed.Appx.

122, 126 (5th Cir.2003).

Factors the Fifth Circuit has used in assessing whether a debtor has provided adequate

assurance of future performance under a lease include (1) whether the debtors financial data



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indicates its ability to generate an income stream sufficient to meet its obligations; (2) the general

economic outlook in the debtors industry; and (3) the presence of a guarantee. Id. (citingRichmond

Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1310 (5th Cir.1985)). Additional factors that

courts have examined include (1) the debtors payment history; (2) presence of a security deposit; (3)

evidence of profitability; (4) plan that would earmark money exclusively for the landlord; and (5)

whether the unexpired lease is at, or below, the prevailing rate. See e.g., Fine Lumber, 383 B.R. at

573.)

During the course of this case, Century Exploration had been advised that funds existed

specifically for the future P&A liability of the Debtor for the Ship Shoal wells. However, apparently

no such funds currently exist. Century Exploration learned this fact only within the last two weeks.

While Century Exploration is optimistic that a mechanism to assure payment of all future expenses

can be worked out among the parties, to date, there is no agreement as to such a mechanism.

Here, the Trustee has not shown that he can or will pay the Debtors share of existing P&A

obligations for those wells which are currently non-producing. There appears to be no item in the

budget for this necessary expense. As for future P&A responsibilities, there is no showing that the

funds which will be put into escrow for future P&A will be secured for those purposes or that they

will be sufficient. The funds attributable to the Ship Shoal area account for roughly 93% of the

Debtors gross revenue. Without those funds, the Debtors case must be converted.

As for the Trustees offer to cure pre-petition monetary defaults through seven months of

installment payments, under the circumstances of this case, that is not the prompt cure required by the

code. The Trustee was appointed in this case on October 11, 2011. He has enjoyed the benefits of

the subject executory contracts since that time and is apparently current on post petition joint interest

billings. Likewise, all production payments owed to the Debtors estate have been paid. However,



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now, twenty (20) months later, to extend payment of the pre-petition monetary default for seven

additional months is not the prompt cure mandated by the Code.

III. CONCLUSION

For the foregoing reasons, Century Exploration New Orleans, LLC f/k/a Century Exploration

New Orleans, Inc. objects to the confirmation of the First Amended Chapter 11 Plan of

Reorganization [P-402] proposed by Gerald H. Schiff, Chapter 11 Trustee for the Bankruptcy Estate

of Virgin Offshore USA, Inc.

Respectfully submitted;

STEFFES, VINGIELLO & McKENZIE, LLC

By: /s/ Arthur A. Vingiello___________________

ARTHUR A. VINGIELLO (LA Bar #13098)13702 Coursey Blvd., Building 3Baton Rouge, Louisiana 70817Telephone: (225) 751-1751Facsimile: (225) 751-1998E-mail:[email protected]

Attorneys for Century Exploration New Orleans, LLC

f/k/a Century Exploration New Orleans, Inc.

mailto:[email protected]:[email protected]:[email protected]:[email protected]


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UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF LOUISIANA

In re:

CASE NO. 11-13028

VIRGIN OFFSHORE USA, INC.SECTION A

I nvoluntary Debtor

CHAPTER 11

******************************************************************************

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the above and foregoing MEMORANDUM IN

SUPPORT OF CENTURY EXPLORATION NEW ORLEANS, LLCS OBJECTION TO FIRST

AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED MARCH 28, 2013, PROPOSED

BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE

USA, INC. has this day been served upon the following parties of interest:

Office of U.S. TrusteeEastern District of Louisiana400 Poydras Street, Suite 2110

New Orleans, LA 70130

Virgin Offshore USA, Inc.c/o Rick M. Shelby201 St. Charles Avenue, Ste. 4000

New Orleans, LA 70170-4000

Helis Oil & Gas Co., LLC

c/o J. David Forsyth

Sessions, Fishman, Nathan & Israel, LLP

201 St. Charles Ave., Ste. 3815New Orleans, LA 70170

Specialty Rental Tools & Supply, LLC

and Sooner Pipe, LLC

c/o Albert J. Derbes, IVTHE DERBES LAW FIRM, LLC3027 Ridgelake DriveMetairie, LA 70011-8176

Official Committee of Unsecured Creditors

of Virgin Oil Company, Inc.

c/o Benjamin Kadden & Stewart F. PeckLugenbuhl, Wheaton, Peck, Rankin601 Poydras St., Suite 2775

New Orleans, LA 70130

Virgin Offshore USA, LLC

c/o Douglas S. Draper & Tristan MantheyHeller, Draper, Hayden, Patrick & Horn, LLC650 Poydras Street, Ste. 2500

New Orleans, LA 70130-6103

Dynamic Energy Services, LLCc/o Michael A. CrawfordTaylor, Porter, Brooks & Phillips, LLPP.O. Box 2471Baton Rouge, LA 70821-2471

Precision Drilling, LPc/o H. Kent AguillardYoung, Hoychick and AguillardP.O. Box 391Eunice, LA 70535

Tanner Services, LLC

c/o Jacque B. Pucheu, Jr.

Pucheu, Pucheu & Robinson, LLP

P.O. Box 1109Eunice, LA 70535

by depositing same in the U.S. mail, postage prepaid, and properly addressed.

I HEREBY FUTHER CERTIFY that a copy has also been served upon the following

parties by electronic notice via the Courts CM/ECF system:

H. Kent Aguillard,[email protected] Brent B. Barriere,[email protected] Raymond A. Beyt,[email protected] Frederick L. Bunol,[email protected],[email protected] Jeffrey M. Burmaster,[email protected]

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Christopher T. Caplinger,[email protected],[email protected] Jeffery D. Carruth,[email protected] Leo D. Congeni,[email protected] Michael A. Crawford,[email protected] Albert J. Derbes,[email protected],[email protected] Carl Dore,[email protected],[email protected] Steven G. Durio,[email protected],[email protected] Stanwood R. Duval,[email protected] J. David Forsyth,[email protected] Tanya N. Garrison,[email protected] Mark S. Goldstein,[email protected],[email protected] Robert C. Gravolet,[email protected] ,[email protected] Thomas G. Gruenert,[email protected],[email protected] George B. Jurgens,[email protected],[email protected] Benjamin Kadden,[email protected] Omar F. Kuebel,[email protected] Dewey H. Lane,[email protected] Armistead M. Long,[email protected],[email protected] Mark Mintz,[email protected] ,[email protected] Louis M. Phillips,[email protected] Patricia Williams Prewitt,[email protected] Jacque B. Pucheu,[email protected],[email protected] Ryan J. Richmond,[email protected] E. Kathleen Shahan,[email protected] Patrick M. Shelby,[email protected] Paul N. Temple,[email protected] Thomas J. Smith,[email protected],[email protected],[email protected] Office of the U.S. Trustee,[email protected] Dennis J. Vidrine,[email protected] David F. Waguespack,[email protected], [email protected],

[email protected]

Guy E. Wall,[email protected],[email protected] Kristin N. Wallis,[email protected], [email protected] Timothy A. York,[email protected] Rouge, Louisiana this 12th day of June, 2013.

______/s/ Chad E. Biggs_____

CHAD E. BIGGS

Respectfully Submitted by:Arthur A. Vingiello (#13098)

Steffes, Vingiello & McKenzie, LLC13702 Coursey Blvd., Building #3Baton Rouge, Louisiana 70817Telephone: (225) 751-1751Facsimile: (225) 751-1998E-mail: [email protected]

Attorneys for Century Exploration New Orleans, LLC

f/k/a Century Exploration New Orleans, Inc.

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected],%[email protected]:[email protected],%[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected],%[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

memorandum in support of century exploration objection 6-12-13.pdf

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