In re North Am. Petroleum Corp.. Usa
| Decision Date | 18 February 2011 |
| Docket Number | Adversary Nos. 10–51624 (CSS), Bankruptcy No. 10–11707 (CSS),10–51675(CSS). |
| Citation | 445 B.R. 382 |
| Parties | In re NORTH AMERICAN PETROLEUM CORPORATION USA, et al., Debtors.Compass Bank, Administrative Agent, as Successor in Interest to Guaranty Bank, FSB, And Texas Capital Bank, N.A., Co–Agent, Plaintiffs,v.North American Petroleum Corporation USA, Prize Petroleum LLC and Equal Energy U.S., Inc., as Successor to Altex Energy Corporation and Enterra Acquisitions Corp., Defendants.North American Petroleum Corporation USA, et al., Plaintiffs,v.Equal Energy U.S. Inc. f/k/a Enterra Acquisitions Corp. and Successor in Interest to Altex Energy Corp. and Equal Energy Ltd. f/k/a Enterra Energy Corporation & Enterra Energy Trust, Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
OPINION TEXT STARTS HERE
Evelyn J. Meltzer, David M. Fournier, John Henry Schanne, II, Pepper Hamilton LLP, Wilmington, DE, Amy Osberg Roberts, Carl E. Glaze, Nicole Ruble Metcalf, Jackson Walker LLP, Dallas, TX, Mark D. Christiansen, Oklahoma City, OK, Robert S. Hertzberg, Pepper Hamilton LLP, Detroit, MI, for Plaintiffs.
Domenic E. Pacitti, Margaret M. Manning, Klehr Harrison Harvey Branzburg LLP, Travis A. McRoberts, Richards, Layton & Finger, P.A., Wilmington, DE, for Defendants.Garvan F. McDaniel, Mary E. Augustine, Bifferato Gentilotti LLC, Wilmington, DE, Michael G. Colvard, Martin & Drought, P.C., San Antonio, TX, for Intervenor.
FINDINGS OF FACT AND CONCLUSIONS OF LAW 1
On December 15, 16, and 17, 2010, the Court conducted an evidentiary hearing on Counts 1, 2 and 7 of Debtors' 2 Complaint filed in Adversary Proceeding No. 10–51675 (CSS) (“Debtors' Adversary Proceeding”) and Equal Energy's Request for Payment of Administrative Expenses Pursuant to 11 U.S.C. §§ 503(b)(1)(A) and 507(a)(2) (Case No. 10–11707 at Docket No. 129) (the “Administrative Claim”). The Banks 3 intervened in Counts 1, 2, and 7 of Debtors' Adversary Proceeding and are respondents to the Administrative Claim. Appearing at trial were counsel for the Debtors, Equal Energy,4 the Banks, and the Official Committee of Unsecured Creditors.
The Court has reviewed and considered the arguments of counsel, the testimony of witnesses (including testimony by deposition), the exhibits admitted into evidence at trial and the documents and pleadings filed in connection with Equal Energy's Administrative Claim and Counts 1, 2, and 7 of Debtors' Adversary Proceeding and the entire record before the Court.5 Based upon the entire record, these are the Court's findings and conclusions, pursuant to Rule 52 of the Federal Rules of Civil Procedure, made applicable by Federal Rule of Bankruptcy Procedure 7052.
1. NAPCUS is a Delaware corporation with its principal place of business in Denver, Colorado. SOF, ¶ 1.6 Prize is an Oklahoma limited liability company with its principal place of business in Denver, Colorado. Id. The Debtors operate an independent oil and gas exploration and production company with activities primarily in Oklahoma (, the “Hunton Resource Play”). Id. Petroflow Energy Ltd. (“Petroflow”) is the parent company of both NAPCUS and Prize. Id. Petroflow is not a party in this adversary proceeding. See Trial Tr., 186:11–13; Moodie Depo. Tr., 19:2–18. 7
2. Equal Energy U.S. Inc. f/k/a Enterra Acquisitions Corp. and successor-in-interest to Altex Energy Corporation is an Oklahoma corporation with its principal place of business in Oklahoma City, Oklahoma. SOF, ¶ 2. Equal Energy Ltd. f/k/a Enterra Energy Corporation and Enterra Energy Trust is a corporation organized pursuant to the province of Alberta, Canada. Id. Equal Energy are oil and gas exploration and production companies operating in Oklahoma and Canada. Id.; Trial Tr., 184: 5–15.
3. Compass Bank, Administrative Agent, as successor-in-interest to Guaranty Bank, FSB, is an Alabama banking corporation with its principal place of business in Alabama. SOF, ¶ 3.
4. Texas Capital Bank, N.A., is a national banking association with its principal place of business in Texas. SOF, ¶ 4.
5. On May 25, 2010 (the “Petition Date”), the Debtors filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). SOF, ¶ 27. The Debtors are authorized to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Id.
6. On July 6, 2010, the Court entered its Final Order (A) Authorizing the Debtors' Use of Cash Collateral, (B) Granting Adequate Protection and (C) Granting Related Relief (the “Cash Collateral Order”). SOF, ¶ 28 (citing Cash Collateral Order, PTX 715).
7. Also on July 6, 2010, the Court entered its Interim Order (I) Granting Interim Relief on Equal Energy's Emergency Motion for Relief From Stay and (II) Scheduling a Final Hearing (hereinafter the “Athena Order”) (Case No. 10–11707 at Docket No. 118).
8. On July 15, 2010, the Debtors initiated an adversary proceeding by filing a Complaint for Recharacterization of the CRA against Equal Energy. SOF, ¶ 29 ( citing Debtors' Adversary Proceeding, PTX 714). Among other things, the Debtors' Complaint requests, inter alia, the following relief: (1) declaratory judgment on whether the CRA (defined below) can be recharacterized as a financing agreement (Count 1); (2) alternatively, in the event that the CRA is not recharacterized, an order that the Debtors may avoid payments made or obligations incurred under the CRA as fraudulent transfers (Count 2); and (3) declaratory judgment finding that Debtors do not owe payments under the CRA as administrative expenses (Count 7). SOF, ¶ 29 ( citing Debtors' Adversary Proceeding, PTX 714 at ¶¶ 63–73, 96–100).
9. Also on July 15, 2010, Equal Energy filed its Administrative Claim. SOF, ¶ 30 ( citing Administrative Claim, PTX 322). Equal Energy's Administrative Claim alleges that (1) Equal Energy is entitled to additional administrative expense treatment for the Debtors' post-petition use of the SWD Infrastructure; and (2) the Debtors owe money under the CRA for reimbursement of capital expenses or, in the alternative, the Debtors must pay a market rate to Equal Energy for the disposal of the waste saltwater generated from the Debtors' working interest share of the producing wells previously drilled under the Farmout Agreement. SOF, ¶ 30 ( citing Administrative Claim, PTX 322 at ¶¶ 10–12). Equal Energy seeks an administrative expense claim in one of two proposed amounts: (1) the CRC (defined below) payments; or (2) a monthly payment of approximating fifty cents per barrel for saltwater disposal. ( See Administrative Claim, PTX 322 at ¶ 23). Specifically, Equal Energy seeks an administrative expense in the amount of $1,200,000 to be paid immediately plus between $700,000 and $1,000,000 per month to be paid until the earlier of a sale of substantially all of the Debtors' assets or the confirmation of a plan of reorganization. ( See Administrative Claim, PTX 322 at Prayer).
10. On August 13, 2010, Equal Energy filed a motion to dismiss the Complaint, or alternatively, for a more definite statement. SOF, ¶ 31 ( citing Dismissal Mot. (Case No. 10–11707 at Docket No. 6)).
11. On August 30, 2010, the Court issued an order to consolidate counts 1, 2 and 7 of the Complaint and the Administrative Claim. SOF ¶ 32 ( citing Case No. 10–11707 at Docket No. 254).8
12. On December 1, 2010, the Court issued an order denying Equal Energy's motion to dismiss the Debtors' Complaint. SOF, ¶ 33 ( citing Case No. 10–51675 at Docket No. 101).
13. This Trial considered Equal Energy's Administrative Claim and Counts 1, 2, and 7 of the Debtors' Adversary Proceeding. The trial to consider the remaining Counts of the Debtors' Adversary Proceeding and the Banks' Adversary Proceeding is set to commence in April, 2011.
14. To support their drilling activities, the Debtors entered into a senior secured credit agreement (collectively, together with any additional amendments thereto, the “Credit Agreement”), originally dated August 25, 2005, with Texas Capital Bank, N.A., as Administrative Agent, and Guaranty Bank, FSB, as Co–Agent Bank, on behalf of the lender parties thereto, to provide the Debtors with a term and revolving credit facility that over time was increased to potentially provide loans up to $200 million. SOF, ¶ 5. Compass Bank has since succeeded Guaranty Bank as successor Co–Agent Bank under the Credit Agreement. Id. Approximately $105 million remains outstanding under the Credit Agreement. Id.
15. In late 2005, the Debtors approached Equal Energy with a potential opportunity to acquire some producing oil and gas assets the Debtors had identified in the Hunton Resource Play in Oklahoma. Trial Tr., 50:23, 53:8–18; Trial Tr., 185:5–9; SOF, ¶ 7; Defendants' Exhibit 801, at p. 1. The potential acquisition was too large for the Debtors to pursue on their own. Trial Tr., 53:11–12; Trial Tr., 185:21–22; Trial Tr., 72:1–9. So the Debtors approached Equal Energy to see if Equal Energy would be interested in buying the producing assets and then giving the Debtors the opportunity to take a “farmout” on the development of the Hunton Resource Play. Trial Tr., 53:13–17. 9
16. Since 2006, the Debtors and Equal Energy have conducted business under a number of agreements involving the production of natural gas and oil in the Hunton Play in Oklahoma.
17. In January, 2006, NAPCUS entered into a letter agreement with Equal Energy's predecessor (PTX 302) (the “Letter Agreement”). The stated purpose of the Letter Agreement was to “express the understanding and agreement of [NAPCUS] and [Equal Energy] regarding the acquisition of oil and gas properties by [Equal Energy] under the Purchase and Sale Agreements ... and following such acquisition, the development of those oil and gas properties.” In the Letter Agreement, the parties agreed...
To continue reading
Request your trial
-
Spire Consulting Grp., LLC v. Fleming Steel Co. (In re Fleming Steel Co.)
...of the Bankruptcy Code is to encourage parties “to continue to do business with a debtor post-petition,” In re North American Petroleum Corp. USA, 445 B.R. 382, 400 (Bankr.D.Del.2011), and “to encourage third parties to provide necessary goods and services to the debtor-in-possession.” Id. ......