Tuesday, October 12 2021

Several oil companies are challenging Fieldwood Energy’s proposed reorganization plan, saying it does not adequately address their environmental obligations.

Oil companies, which include Shell Offshore, BP Exploration & Production, ConocoPhillips Company, and Marathon Oil Company, previously sold rights and interests in various oil and gas properties to Fieldwood or its predecessor, Apache Corporation, or have entered into contracts with Fieldwood governing assets that are being transferred under the proposed plan. Fieldwood, represented by Weil Gotshal & Manges, filed for bankruptcy in August for the second time since 2018, blaming the impact of the COVID-19 pandemic on oil prices.

The companies filed their objections Wednesday before a June 9 virtual hearing in which US bankruptcy judge Marvin Isgur in Houston will consider the plan.

Under Fieldwood’s proposed reorganization plan, existing lenders will acquire certain deepwater and platform assets for $ 1 billion, an amount consisting of a credit offer of existing debt and $ 105 million in cash. Additionally, Fieldwood will be divided into multiple entities. One of the entities, known as Fieldwood Energy I LLC, will take certain properties that Fieldwood acquired from Apache Corporation in 2013, as well as related liabilities. The company, which operates in the Gulf of Mexico, will also abandon certain oil and gas leases.

Oil companies opposing the plan contend that Fieldwood has not explained how it will address the environmental and regulatory responsibilities associated with those leases and fear they will end up on the hook for costs. They also claimed that the new entities created through the restructuring will not have enough money to pay for the new environmental liabilities.

“Allowing debtors to abandon these assets, from a public policy perspective, would set a troubling precedent whereby future debtors can avoid similar pervasive environmental liabilities from decommissioning in the Gulf of Mexico,” said Shell, represented by Norton Rose Fulbright, in your objection.

A Fieldwood attorney, Alfredo Pérez de Weil, did not immediately respond to a request for comment.

Oil producers also disagreed with what they called too broad statements for lenders, minor creditors, predecessors, current and former officers and directors, among others. Shell specifically targeted Apache, saying it should not be relieved of any environmental or decommissioning obligations or obligations with companies with which Fieldwood had joint working interests.

BP, represented by Greenberg Traurig, said in its objection that it will seek to recover the costs derived from Fieldwood’s environmental obligations that it ends up covering. BP estimates that those costs could be as high as $ 340 million.

BP also criticized Fieldwood’s management team, saying the plan is doomed in part because it is being spearheaded by the same people who bankrupted the company twice in three years.

“Nothing in the current plan suggests that the debtors will be successful this time,” BP said.

Through the previous bankruptcy, Fieldwood cut $ 1.6 billion from its debt load and secured financing for its purchase of deepwater oil and gas assets in the Gulf of Mexico.

The current plan provides Fieldwood with $ 304 million in exit financing and asks lenders to raise $ 40 million through an equity rights offering.

The case is In re Fieldwood Energy LLC, United States Bankruptcy Court, Southern District of Texas, No. 20-bk-33948.

For debtors: Alfredo Pérez, Matthew Barr and Jessica Liou from Weil Gotshal & Manges

For Shell: Ryan Manns, Scott Drake and Emma Persson of Norton Rose Fulbright USA.

For BP: Shari Heyen, Karl Burrer, Craig Duewell and John Hutton of Greenberg Traurig

(Maria Chutchian reports on bankruptcies and corporate restructurings. She can be contacted at [email protected].)

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