Bankrupt oil and gas producer Samson Resources Corp. is defending plans for a Chapter 11 sale of 1,262 lower-yield well sites, telling a Delaware court the move will cut expenses by $6 million annually and saying that claims of risks to taxing authorities, landowners or leaseholders are unfounded.
In a document filed with the court, Samson said it has long sold off wells that “no longer fit” company goals, with auctions of low-value production sites by Samson or its predecessors generating $600 million over the past 20 years. Bankruptcy law allows "ordinary course of business" sales without hearing, the company said.
But the proposed March 9 auction pumped up concern and opposition among some creditors and landowners who have already urged the U.S. Trustee’s office to create a committee to represent thousands now holding rights to royalties from Samson wells across the country.
The company’s sell-off targets span 10 states, although most are in Texas, Oklahoma, Louisiana and New Mexico. The deals could involve thousands of individuals or companies holding production royalty rights or claims to output. Most wells are "old, with limited going-forward production capability," the company reported.
“I, we, object to Samson being able to sell any wells under any circumstances” pending a third-party review, landowner Cherie Thornton said in a letter to the court on behalf of herself and her siblings. The relatives are battling for more details on royalty payments for hydrocarbons pumped from beneath their properties.
Samson’s official committee of unsecured creditors said it was unable to determine if individual wells would generate more from sale than retention, because Samson has yet to establish or disclose minimum sale prices for each asset.
The group asked for advance notice and consultation on minimum sale prices for each well, along with an opportunity for court review in the event of disputes.
EnerVest Operating LLC, which collects revenues from well production on behalf of third parties and operates its own wells, said that Samson had not yet disclosed how it will treat claims against individual wells.
Samson also has not yet clarified inconsistencies and conflicts between bankruptcy requirements and its intent to sell “under any agreements or documentation necessary to consummate” the deals, EnerVest said in an objection to the plan.
“The debtors may not own a 100% interest in the wells, nor do they explain the nature, extent and/or character of interests they do own and seek to sell,” EnerVest said.
Harrison Williams, chief executive officer of Oil & Gas Asset Clearinghouse II LLC, said in a filing with the court that the company would receive a commission on well sales equal to or less than customary rates paid by other sellers.
Samson told the court that it had been in communication with some groups or property owners objecting to the plan, with some complaints already addressed.
“The sale of the wells will not unduly prejudice the rights or interests of any party, including those parties that filed the objections,” Samson said in its response.
Samson sought protection from creditors in September, with debts that included a $942 million first-lien revolving credit facility, $1 billion in second-lien term notes and more than $2 billion in senior unsecured notes.
Much of the debt carried over from a 2011 leveraged buyout from the founding Schusterman family led by Kohlberg Kravis Roberts & Co. LP affiliates and investors Crestview Partners, Itochu Corp. and Natural Gas Partners.
Samson had hoped to shed more than $3 billion in debt with it’s Delaware Chapter 11 proceeding, emerging with $250 million in cash, according to a first-day declaration from Chief Financial Officer Philip Cook. Continued oil and gas market headwinds and management disruptions have complicated the effort.
Samson is represented by James Sprayregen, Paul Basta, Edward Sassower, Ross Kwasteniet, Brad Weiland, Yosef Riemer and Joshua Sussberg of Kirkland & Ellis LLP and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP.
The committee is represented by Joseph Farnan Jr., Joseph Farnan III and Michael Farnan of Farnan LLP and Thomas Lauria, Glenn Kurtz, J. Christopher Shore, Michele Meises and Thomas MacWright of White & Case LLP.
The landowners are represented by Scott Gautier of Robins Kaplan LLP.
The case is In re: Samson Resources Corp., case number 1:15-bk-11934, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Kelly Duncan.
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