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Samson Gets Conditional OK for $660M in Ch. 11 Sales

A Delaware bankruptcy judge gave Samson Resources Corp. the nod Monday for six asset sales reckoned to raise nearly $660 million for the estate, once the debtor works out a tangled knot of objections over contracts and creditor payment amounts, including a $137 million dispute with the U.S. government.

During a lengthy hearing in Wilmington, U.S. Bankruptcy Judge Christopher S. Sontchi said he would give the sales of six different packages of oil and gas assets located primarily in Oklahoma, North Dakota, New Mexico and Texas the OK after hearing argument and testimony about the marketing process and the support the sales have from creditors.

“I’ll approve the six sales as being in the debtor’s best interest,” Judge Sontchi said from the bench.

But the actual value that would go to the bankruptcy estate may have not been totally ascertained because of myriad challenges pending that regard cure amounts in leases and other contracts, in particular a $136.9 million dust-up with the U.S. Department of the Interior.

The Interior Department says that Samson may have underpaid on royalties on federal and tribal land to the tune of up to $66.6 million, with the rest of the money potentially owed coming from past and future reclamation and decommissioning costs.

Those issues and others with individual landholders' lease and royalty rights are scheduled to be hashed out at a future hearing, but Judge Sontchi said it was unlikely Samson owes the federal government and others nothing when he considers the matter.

“I am not going to make a ruling that the cure amount is zero,” the judge said.

The sales are expected to make a dent in the $4 billion Samson owed to creditors when it filed for Chapter 11 protection in September 2015, augmenting a restructuring strategy that includes a debt-for-equity swap with second-lien lenders.

The sales Judge Sontchi agreed to approve consist of Samson’s so-called Permian mineral assets, which occupy a swath of West Texas and spill over into New Mexico, to Stone Hill Minerals Holdings LLC for $51.7 million; Williston assets in North Dakota, and some of Montana, to Resource Energy Can-Am LLC for $75 million; its San Juan assets in New Mexico, and parts of Colorado, to the Southern Ute Indian Tribe, doing business as Red Willow Production Co., for $116 million; its west Anadarko assets to Tecolote Holdings LLC for $131 million; its central Anadarko assets to Fairway Resources Partners III LLC for $132 million; and its east Anadarko assets to Rebellion Energy LLC for $152 million, according to court records.

The Andarko assets are mostly in Oklahoma, with some areas in Kansas and Texas.

Once the sale issues are finally ironed out, Samson is hoping to move on to the confirmation process, but may hit an obstacle in its ongoing fight with the official committee of unsecured creditors.

The unsecured creditors are locked in combat with Samson and its secured creditors and seeking derivative standing to challenge first- and second-lien creditors in the case, mostly connected to an $8 billion leveraged buyout in 2011 and $3 billion in emergency second-lien financing Samson obtained just nine months later.

Judge Sontchi had denied Samson an extension of its exclusive right to file a Chapter 11 plan in September, and the unsecured creditors committee has said it plans to file a competing plan, a move that would set the stage for a time-consuming confirmation trial with the court potentially considering both exit strategies simultaneously.

Samson, which operates or has royalty or working interests in about 8,700 oil and gas wells, filed for Chapter 11 protection in September 2015 listing more than $4 billion in debt, and citing many of the same bearish forces in the energy commodity market that have sent many of its peers flocking into bankruptcy court.

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 government is represented by Ruth A. Harvey, Margaret M. Newell and Mary A. Schmergel of the U.S. Department of Justice.

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.