Case Studies
Fieldwood Energy
Energy
SITUATION
- Chiron advised our Client which provided surety bonds to insure plugging and abandonment (P&A) obligations for Fieldwood Energy LLC (the “Company”)
- The Company was one of the largest oil and gas producers in the Gulf of Mexico (GOM) and filed Chapter 11 in August 2020 due to overwhelming debt in a low oil and gas price environment
- The Company was a complex estate with many creditor classes. The Company’s thousands of operated and non-operated wells spread throughout the GOM, were a result of various acquisitions and were held in many subsidiaries. Many of the wells and structures have complicated overlapping fractional interests owned by other producers
- P&A liabilities on offshore properties traditionally accrue first to the current operator (the Company) and then to P&A bonding providers and then to previous owners in the chain of title
- Chiron’s Transactional Advisory Scope:
- Analyze and assess the Client’s potential payout risk on bonded properties based on the Company’s financial condition, including petroleum engineering review, P&A cost review, and financial modeling
- Chiron’s transactional work included developing and running various financial scenarios with different product pricing and P&A costs to determine a range of potential bonding payout exposures
- Develop, together with Client’s bankruptcy counsel, strategies to mitigate bonding exposure if possible
- Despite improved prices and volumes, many stakeholders consented to the Company’s plan to “cherry-pick” properties
- The Company’s plan of reorganization became effective August 2021
- Under a key part of the plan, the Company was able to completely “disown” chosen sub-economic assets and their P&A liabilities, putting these obligations to the bonding providers and previous owners. This P&A cost will likely exceed hundreds of millions of dollars
“Chiron was knowledgeable and effective in assisting my client in assessing production, credit risks and alternatives in the Fieldwood Energy LLC bankruptcy proceeding.” — Elliot Scharfenberg, Partner at Krebs Farley & Dry
The Challenge
Fieldwood Energy LLC was one of the largest oil and gas producers in the Gulf of Mexico (GOM) and filed Chapter 11 in August 2020 due to overwhelming debt in a low oil and gas price environment.
The Chiron Solution
Develop, together with Client’s bankruptcy counsel, strategies to mitigate bonding exposure if possible.
The Result
Under a key part of the plan, the Company was able to completely “disown” chosen sub-economic assets and their P&A liabilities, putting these obligations to the bonding providers and previous owners. This P&A cost will likely exceed hundreds of millions of dollars.