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Ute Tribe Takes Issue With Bankrupt Samson's Lease Bid

01 April 2016

The Southern Ute Indian Tribe took issue Friday with oil and gas firm Samson Resources Corp.’s bid to assume leases the tribe granted for mineral rights, arguing many are not “unexpired” under the Bankruptcy Code’s definition and the court could give the debtor more rights than it is due.

In an objection before the Delaware bankruptcy court, the tribe argued that many of leases in question — which govern matters including pipeline easement, rights of way and surface-use agreements — expired before Samson filed for Chapter 11 protection, and while it supports their renewal, they cannot be assumed under Chapter 11 rules.

What’s more, there is a genuine controversy over what legal rights are created by a tribal oil and gas lease that cannot be determined simply by a motion in bankruptcy court, but must be decided by a lawsuit such as an adversary action, the tribe argued.

"There does not appear to be a definitive position that has been taken by the Bureau of Indian Affairs or the Southern Ute Indian Tribe respecting the ultimate legal interest created by a tribal oil and gas lease,” the objection states. “Given the legal uncertainly regarding the matter, the Southern Ute Indian Tribe requests that any order entered on the motion not contain a definitive finding or determination whether the legal nature of the interest created by the leases to Samson are ‘rental agreements’ or create a determinable fee interest in minerals.”

The tribe also argued that while Samson did request extensions for some of the leases, they did expire before the petition date, and approval of the extensions is still pending approval by the Bureau of Indian Affairs.

Because final renewal of the applications has not yet been granted, the leases are not assumable under the Bankruptcy Code, even if the tribe is amenable to the approval, the tribe argues.

“It is axiomatic that the expired pipeline easements, rights of way and surface leases cannot be assumed,” the objection states.

Representatives for Samson did not immediately respond to requests for comment Friday.

Samson filed for Chapter 11 protection in September, in part because of the same bearish forces in the energy commodity market that has sent many of its peers flocking into bankruptcy court.

Since the filing, the company has been pelted with bad news, not least of which is a more than 20 percent drop in the price of oil and a more than 30 percent drop in the price of natural gas since the petition, complicating an already difficult restructuring.

The company’s reorganization strategy had the backing of many lenders, but has since fizzled in the face of continued oil and gas price volatility.

The company also announced it was struck by a $1.8 million hacking attack and was able to recover at least $1.5 million of the money, but is now dealing with calls from creditors and the federal bankruptcy watchdog for a possible examiner to keep an eye on its funds.

Samson listed more than $4 billion in debt, including 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 liabilities come 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, according to a first-day declaration from Chief Financial Officer Philip Cook.

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 Southern Ute Indian Tribe is represented by Mark L. Desgrosseilliers of Womble Carlyle Sand Ridge & Rice LLP and Barnet B. Skelton Jr.

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.

Joshua A. Sussberg, P.C.