the uncertainties regarding what rights a mid-stream company may retain post-rejection all weigh in favor of compromise. The Quicksilver dispute settled the next week; it is unfortunate that this panel did not provide lottery picks to the audience.
Panel 3: Bad News from the Oil Patch
The final panel for the seminar discussed broader issues relating to oil and gas bankruptcy cases. The panelists were Fellows Jan Hayden (Baker, Donelson, Bearman, Caldwell & Berkowitz), Louis Phillips (Kelly, Hart, & Pitre), and Lou Strubeck (Norton Rose Fulbright). Bill Greendyke of Norton Rose Fulbright moderated.
The panel continued the discussion about how technological and operational changes in the oil and gas industry have resulted in financial changes and new restructuring challenges. Equipment has become more expensive and becomes obsolete faster. This necessitates increased debt loads, which has been facilitated by alluring mezzanine financing and reserve-based lending. The general consensus was that increased filings are coming: commodity price hedging and some “extend and pretend” banking practices have helped keep creditors at bay, but this borrowed time may be running out.
In light of this forecast, the panel highlighted a number of new and old issues that need to be considered in such cases. Intellectual property issues, and attendant questions about assignment and assumption, have become more common thanks to increasingly sophisticated exploration techniques, such as seismic data. Regulatory issues were discussed—the usual concerns about plugging and abandonment liabilities were reviewed, and newer problems with off-shore regulation, especially post-Deepwater Horizon bonding requirements, were also examined. The panel concluded by discussing the pros and cons of asset sales and the best practices for approaching a sale process. The general consensus seems to be that oil and gas restructuring cases are more challenging than ever.
All in all, the seminar was a hit. Bankruptcy lawyers and their fellow travelers thankfully both enjoy socializing with each other and enjoy the sort of thoughtful, intellectually stimulating discussions that this seminar exemplified. Sincere appreciation is due to the moderators, panelists, and numerous other people whose time and hard work made the seminar such a success.