Tabula Rasa Partners LLC
CASE SUMMARY: E&P Company Tabula Rasa Partners to Run Sale Process; Seeks Rejection of Sunoco Midstream Agreements
Thu 12/09/2021 18:02 PM
Relevant Documents:
Voluntary Petition
First Day Declaration
Cash Collateral Motion
First Day Hearing Notice
“The Debtor believes that the value of their assets will not come close to the amount of secured debt encumbering those assets while the Midstream Agreements are in effect,” Tabula independent director Michael Keener says in the first day declaration; “however, if the Debtor was not burdened by the Midstream Agreements, the Debtor believes that the value of its assets may meet or exceed the secured debt.” Given the impact rejection of the agreements would have on the value of its assets, Keener continues, the debtor has determined it would not be beneficial to begin a marketing process until this threshold issue has been decided.
The first day hearing is set for tomorrow, Friday, Dec. 10, at 2 p.m. ET.
The company’s prepetition capital structure includes:
The Cibolo note purchase agreement was entered into in July 2018 in the amount of $15 million secured by liens on all of the debtor’s assets. Between July 2018 and March 2020, Cibolo subsequently funded an incremental $25 million under the agreement to finance CO2 purchases and field development, bringing the debtor’s total secured debt amount to $40 million. In July, Cibolo and the debtor refinanced the debt, and Cibolo exchanged approximately $19.8 million of the debtor’s obligations under the agreement for 100% of the equity interests in the debtor, leaving approximately $22.2 million owed to Cibolo. As of the petition date, the total amount due under the note purchase agreement is approximately $19.9 million. The maturity date for the obligations is July 12, 2022.
Also in July 2018, the debtor entered into a hedging agreement with BP Energy Company, under which the obligations are secured by a lien on all of the debtor’s assets. Soon after, the debtor, Cibolo and BP entered into an intercreditor agreement pursuant to which the obligations and liens held by BP and Cibolo are pari passu. As of the petition date, there were no amounts due under the hedging agreement, the debtor says, while stating that the mark-to-market liability on the hedging agreement was approximately $1 million as of the petition date.
According to the cash collateral motion, the debtor has approximately $2.4 million of cash in its operating bank account.
The debtor says the value of its assets is “significantly depressed due to the burden of” May 2017 midstream agreements by and among Sunoco and the debtor. “The Debtor believes the total cost of the Sunoco agreement significantly outweighs the cost of trucking the production from the Texas properties primarily due to the deficiency payments attributable to the Midstream Agreements which will escalate over the next few years due to decreasing production and higher minimum volume requirements,” the debtor adds.
Tabula attempted to negotiate with Sunoco regarding a potential amendment to the midstream agreements that “may have” allowed the debtor to circumvent the bankruptcy filing; however, the parties were not able to reach a final agreement. The chapter 11 case was filed to “facilitate a transaction for the Debtor’s assets” prior to the maturity date of the $20 million in secured debt obligations owed to Cibolo.
The debtor is represented by Porter Hedges in Houston. The case has been assigned to Judge Christopher M. Lopez (case no. 21-33859).
Background
Tabula Rasa Partners is a Houston-based oil and gas exploration and production company. The company is a working interest owner in two active oil-producing assets in the Central Basin Platform of the Permian Basin in West Texas, the East Seminole San Andres Unit and Lindoss Unit in Gaines County and the Emma San Andres Unit and Emma Cowden Glorietta Unit in Andrews County. These assets are operated by Perdure Petroleum LLC, another working interest owner. Pursuant to a joint operating agreement, Perdure is responsible for the payment of all trade vendors, independent contractors and royalties on a monthly basis. The debtor is also a working interest owner in the “La Veta asset,” which is a CO2 source field in Huerfano County, Colo. The La Veta asset, also operated by Perdure, is currently shut-in, and its associated gas plant has been idled. The debtor has no employees.
In July 2018, Cibolo Energy Partners I LP provided Tabula with a senior secured first lien facility to buy out an existing volumetric production payment, reduce existing payables and provide development capital. Over the next two years, Cibolo funded additional debt that was used for field development and CO2 purchases. Due to low oil prices during the depth of the Covid-19 crisis, certain fields were shut in and, in July 2020, the debtor entered into an out-of-court financial restructuring agreement with Cibolo as equity sponsor. The fields have since been returned to production. Cibolo converted a portion of its debt into equity and now owns 100% of Tabula’s equity. Additionally, in September 2020, the debtor sold a small working interest position in the Emma and Seminole fields to Perdure.
The case representatives are as follows:
Cash Collateral Motion
The debtor says it requires the use of cash on an emergency basis to sustain operations and that Cibolo consents to the requested use of cash collateral on an interim basis.
As adequate protection for Cibolo, the debtor proposes replacement liens and the “timely” payment of interest pursuant to the terms of the prepetition note purchase agreement. The debtor would also provide adequate protection to BP Energy Company in the form of timely payments under the terms of a prepetition hedging agreement. According to the first day declaration, as of the petition date, “there are no amounts due under the Hedging Agreement,” and “the mark-to-market liability on the Hedging Agreement was approximately $1 million (in amounts due from the Debtor).”
The proposed budget is HERE.
Other Motions
The debtor also filed various standard first day motions, including the following:
Voluntary Petition
First Day Declaration
Cash Collateral Motion
First Day Hearing Notice
| Summary |
| Tabula Rasa Partners is a Houston-based oil and gas exploration and production company |
| Seeks to reject “burdensome” midstream agreements with Sunoco Pipeline LP and, afterward, market its assets for sale |
| Requests the use of cash collateral with the consent of prepetition secured lender Cibolo Energy Partners, which indirectly owns 100% of the debtor’s equity |
Houston oil and gas exploration and production company Tabula Rasa Partners filed for chapter 11 protection on Dec. 3 in the Bankruptcy Court for the Southern District of Texas. The debtor seeks to reject “burdensome” midstream agreements with Sunoco Pipeline LP and retain an investment banker to run a marketing and sale process for its assets once the agreements are rejected. The company requests the consensual use of cash collateral subject to the liens of prepetition secured lender Cibolo Energy Partners, which indirectly owns 100% of the debtor’s equity, and notes that it is not seeking approval of the motion to reject the Sunoco agreements on a first day basis.
Houston oil and gas exploration and production company Tabula Rasa Partners filed for chapter 11 protection on Dec. 3 in the Bankruptcy Court for the Southern District of Texas. The debtor seeks to reject “burdensome” midstream agreements with Sunoco Pipeline LP and retain an investment banker to run a marketing and sale process for its assets once the agreements are rejected. The company requests the consensual use of cash collateral subject to the liens of prepetition secured lender Cibolo Energy Partners, which indirectly owns 100% of the debtor’s equity, and notes that it is not seeking approval of the motion to reject the Sunoco agreements on a first day basis.
“The Debtor believes that the value of their assets will not come close to the amount of secured debt encumbering those assets while the Midstream Agreements are in effect,” Tabula independent director Michael Keener says in the first day declaration; “however, if the Debtor was not burdened by the Midstream Agreements, the Debtor believes that the value of its assets may meet or exceed the secured debt.” Given the impact rejection of the agreements would have on the value of its assets, Keener continues, the debtor has determined it would not be beneficial to begin a marketing process until this threshold issue has been decided.
The first day hearing is set for tomorrow, Friday, Dec. 10, at 2 p.m. ET.
The company’s prepetition capital structure includes:
- Secured debt:
- Cibolo note purchase agreement: $19.9 million
- Unsecured debt:
- Sunoco trade debt: $200,000
- Equity: Cibolo TRP LLC (owned 100% by Cibolo Energy Partners I LP) owns 100% of the equity interests of the debtor. The debtor owns 100% of the equity in two non-debtor subsidiaries, Tabula Rasa Resources LLC and Tabula Rasa CO2 LLC.
The Cibolo note purchase agreement was entered into in July 2018 in the amount of $15 million secured by liens on all of the debtor’s assets. Between July 2018 and March 2020, Cibolo subsequently funded an incremental $25 million under the agreement to finance CO2 purchases and field development, bringing the debtor’s total secured debt amount to $40 million. In July, Cibolo and the debtor refinanced the debt, and Cibolo exchanged approximately $19.8 million of the debtor’s obligations under the agreement for 100% of the equity interests in the debtor, leaving approximately $22.2 million owed to Cibolo. As of the petition date, the total amount due under the note purchase agreement is approximately $19.9 million. The maturity date for the obligations is July 12, 2022.
Also in July 2018, the debtor entered into a hedging agreement with BP Energy Company, under which the obligations are secured by a lien on all of the debtor’s assets. Soon after, the debtor, Cibolo and BP entered into an intercreditor agreement pursuant to which the obligations and liens held by BP and Cibolo are pari passu. As of the petition date, there were no amounts due under the hedging agreement, the debtor says, while stating that the mark-to-market liability on the hedging agreement was approximately $1 million as of the petition date.
According to the cash collateral motion, the debtor has approximately $2.4 million of cash in its operating bank account.
The debtor says the value of its assets is “significantly depressed due to the burden of” May 2017 midstream agreements by and among Sunoco and the debtor. “The Debtor believes the total cost of the Sunoco agreement significantly outweighs the cost of trucking the production from the Texas properties primarily due to the deficiency payments attributable to the Midstream Agreements which will escalate over the next few years due to decreasing production and higher minimum volume requirements,” the debtor adds.
Tabula attempted to negotiate with Sunoco regarding a potential amendment to the midstream agreements that “may have” allowed the debtor to circumvent the bankruptcy filing; however, the parties were not able to reach a final agreement. The chapter 11 case was filed to “facilitate a transaction for the Debtor’s assets” prior to the maturity date of the $20 million in secured debt obligations owed to Cibolo.
The debtor is represented by Porter Hedges in Houston. The case has been assigned to Judge Christopher M. Lopez (case no. 21-33859).
Background
Tabula Rasa Partners is a Houston-based oil and gas exploration and production company. The company is a working interest owner in two active oil-producing assets in the Central Basin Platform of the Permian Basin in West Texas, the East Seminole San Andres Unit and Lindoss Unit in Gaines County and the Emma San Andres Unit and Emma Cowden Glorietta Unit in Andrews County. These assets are operated by Perdure Petroleum LLC, another working interest owner. Pursuant to a joint operating agreement, Perdure is responsible for the payment of all trade vendors, independent contractors and royalties on a monthly basis. The debtor is also a working interest owner in the “La Veta asset,” which is a CO2 source field in Huerfano County, Colo. The La Veta asset, also operated by Perdure, is currently shut-in, and its associated gas plant has been idled. The debtor has no employees.
In July 2018, Cibolo Energy Partners I LP provided Tabula with a senior secured first lien facility to buy out an existing volumetric production payment, reduce existing payables and provide development capital. Over the next two years, Cibolo funded additional debt that was used for field development and CO2 purchases. Due to low oil prices during the depth of the Covid-19 crisis, certain fields were shut in and, in July 2020, the debtor entered into an out-of-court financial restructuring agreement with Cibolo as equity sponsor. The fields have since been returned to production. Cibolo converted a portion of its debt into equity and now owns 100% of Tabula’s equity. Additionally, in September 2020, the debtor sold a small working interest position in the Emma and Seminole fields to Perdure.
The case representatives are as follows:
| Representatives | |||
| Role | Name | Firm | Location |
|---|---|---|---|
| Debtor's Counsel | Joshua W. Wolfshohl | Porter
Hedges |
Houston |
| Aaron J. Powerr | |||
| Bryan L. Rochelle | |||
| Counsel to Sunoco
Pipeline LP |
Michaela C. Crocker | Katten Muchin
Rosenman |
Dallas |
| Yelena E. Archiyan | |||
| U.S. Trustee | Ha Minh Nguyen | Office of the
U.S. Trustee |
Houston |
Cash Collateral Motion
The debtor says it requires the use of cash on an emergency basis to sustain operations and that Cibolo consents to the requested use of cash collateral on an interim basis.
As adequate protection for Cibolo, the debtor proposes replacement liens and the “timely” payment of interest pursuant to the terms of the prepetition note purchase agreement. The debtor would also provide adequate protection to BP Energy Company in the form of timely payments under the terms of a prepetition hedging agreement. According to the first day declaration, as of the petition date, “there are no amounts due under the Hedging Agreement,” and “the mark-to-market liability on the Hedging Agreement was approximately $1 million (in amounts due from the Debtor).”
The proposed budget is HERE.
Other Motions
The debtor also filed various standard first day motions, including the following:
- Motion to pay joint interest billings, costs and adjustments
- The debtor summarizes its joint interest billings and GTP costs and adjustments as follows:
- Motion to perform under and amend prepetition hedging agreement
- Motion to use cash management system
- The company has one main operating bank account with JPMorgan Chase Bank.
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2024 Reorg Research, Inc. All rights reserved.