► In This Issue:

• Interests Get Interesting: Overriding Royalty Interests Characterization in Oil & Gas Bankruptcies
• May 2016 Edition of Eye on Bankruptcy Available Online
• Recordings Available: Catch Up on Missed Committee Calls

Interests Get Interesting: Overriding Royalty Interests Characterization in Oil & Gas Bankruptcies

Kate Ortbahn University of North Carolina School of Law Chapel Hill, N.C.

Editor’s Note: The following article, “Interests Get Interesting: Overriding Royalty Interests Characterization in Oil & Gas Bankruptcies,” won the prize for third place in the Eighth Annual ABI Bankruptcy Law Student Writing Competition. Ms. Ortbahn is a recent graduate of the University of North Carolina School of Law in Chapel Hill, N.C.. She is currently a summer associate at Haynes and Boone, LLP in Dallas.

Gas prices have plummeted more than 70 percent in the last two years. This is financially devastating for the oil and gas industry. To cover the “souring energy loans” secured by oil and gas properties and proceeds, U.S. banks have set aside $2.5 billion. Some bankruptcy experts are predicting widespread “carnage” of oil and gas companies, doubling bankruptcy filings. In 2015 alone, 42 energy companies filed for bankruptcy owing more than $17 billion. With such high numbers at stake, creditors and debtors will undoubtedly be battling over what is or is not part of the bankruptcy estate, even before discussing the merits of a proposed restructuring plan or liquidation. In oil and gas bankruptcies, this proves to be an especially complex debate where state law, interpreting contracts and defining property rights meet federal bankruptcy law — particularly surrounding the characterization of transactions.

The process of extracting oil from deep underground is multilayered and complex, and not just because the industry terminology is riddled with acronyms. Oil companies are generally in the business of producing a product, but their financial stakes are placed at different stages or shares of production. Draining hydrocarbons from an oil or gas field, either underwater or underground, produces oil. The site of the drilling is generally subject to an oil and gas lease, a contract between the mineral owner (lessor) and the working interest owner (lessee) who gains the rights to explore, drill and produce oil. The lessee may divide its working interest into fractional interests. The production revenues are then paid out via royalty, overriding royalty interest and lessor royalty interest. These interest-owners own production percentages without bearing the drilling or production costs.

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May 2016 Edition of Eye on Bankruptcy Available Online

The May 2016 edition of Eye on Bankruptcy includes host, Prof. Michelle Harner (University of Maryland Francis King Carey School of Law), interviewing this month's featured guests, Hon. Kevin R. Huennekens (U.S. Bankruptcy Court E.D. VA; Richmond) and Immediate Past President, Brian L. Shaw (Shaw Fishman Glantz & Towbin LLC; Chicago). Speakers discussed a variety of topics, including oil and gas, attorney's fees, gaming, appeals, and more. Relevant cases include In re Meier, Jeffery P. White & Asscocs. v. Fessenden, In re Trump Entm't Resorts, Utzman v. Suntrust Mortg., Inc, and more.

Click here to view this important Eye on Bankruptcy video.

Recordings Available: Catch Up on Missed Committee Calls

Committees have recently hosted a variety of calls to dicuss topics relevant to their members. Listen to the selected recordings listed below and watch your inbox for opportunities to join future calls!

Gifting in 363 Sales and Plans (Unsecured Trade Creditors Committee)

Ethics Issues in Mediation and Party Advocacy (Mediation & Bankruptcy Litigation Committees)

Proposed Changes to Section 550 (Commercial Fraud Committee)