Creditor: ATP Owes More Than $87.62M; Asset Sale Motion Should Be Denied

by Tara Arick on June 4, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

Creditor Statoil USA E&P on May 31 filed a brief objecting to a motion by bankrupt ATP Oil & Gas Corp. (ATP) that seeks approval of bidding procedures in its Chapter 11 proceeding, arguing that ATP has failed to post supplemental bond for more than $ 87.62 million related to deep-water drilling assets ATP is attempting to sell (In Re: ATP Oil & Gas Corporation, No. 12-36287, Chapter 11, S.D. Texas Bkcy.).

Bankruptcy

On Aug. 17, ATP filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas, citing an aggregate debt of $ 1.9 billion brought on by the drilling prohibition instituted in the Gulf of Mexico after the Deepwater Horizon oil spill.

Statoil argues that the Bankruptcy Court should not grant an emergency motion ATP filed seeking approval of the sale of substantially all of ATP’s assets free and clear of all liens, on grounds ATP still owes $ 87,624,275 related to an agreement between ATP and Statoil.

According to court documents, ATP’s business includes the operation of certain oil and gas leases in federal waters offshore of the State of Louisiana. The gas leases pertain to areas known as Block 941, Mississippi Canyon (MC 941) and Block 942, Mississippi Canyon (MC 942).

Telemark

Moreover, MC 941 and MC 942 comprise a portion of ATP’s Telemark project. ATP acquired its interest in MC 941 and MC 942 through an asset purchase agreement (APA) with Hydro Gulf of Mexico LLC in 2006, according to court records. Statoil is the successor to Hydro.

ATP’s interest in MC 941 and 942 is in the nature of operating rights, Statoil says. ATP acquired 100 percent of the operating rights above 18,000 feet, and Statoil retained no economic interest in the shallow depths. Statoil remains a record title owner with respect to the properties in question, it contends.

Statoil maintains that pursuant to 30 Code of Federal Regulations Section 556.52, et seq., lessees of outer continental shelf oil and gas leases must provide bonds to guarantee compliance with all obligations of the lease.

BOEM

Before filing for bankruptcy, ATP was exempt from the requirement that it provide supplemental bonding, Statoil says; however, that changed when the U.S. Bureau of Ocean Energy Management (BOEM) notified ATP in 2012 that it no longer was exempt from the bonding waiver.

Statoil objects to ATP’s sale motion unless certain conditions are met.

Statoil says ATP must cure its default under the APA by immediately posting the supplemental bonds demanded by BOEM with respect to Telemark. Moreover, Statoil says that ATP, and any purchaser of its interest in Telemark, must maintain the supplemental bonds demanded by BOEM at all times until such time as BOEM has determined that there is not any need for supplemental bonding with respect to Telemark.

Reimbursement Sought

Furthermore, ATP and the lenders providing post-petition financing must post bonds in an amount sufficient for BOEM to release the bonds posted by Statoil and immediately reimburse Statoil for all costs incurred in posting the bonds demanded by BOEM, Statoil says.

Statoil argues as well that the sale of the Telemark properties must be made subject to the APA and the buyer of Telemark must be made personally liable for all obligations imposed by the APA.

Statoil is represented by Michael D. Rubenstein of Liskow & Lewis in Houston. ATP is represented by Charles S. Kelley of Mayer Brown in Houston, Howard S. Beltzer and Frederick D. Hyman of the firm’s office in New York and Stuart M. Rozen and Sean T. Scott of the firm’s office in Chicago.

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