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Case Studies

Insurance Company and a Syndicate of Several Insurance Companies

Oil & Gas

Diseño sin título 10

SIT­U­A­TION

  • Chi­ron advised our Clients (an insur­ance com­pa­ny and a syn­di­cate of sev­er­al insur­ance com­pa­nies) which pro­vid­ed sure­ty bonds to insure the avail­abil­i­ty of funds for plug­ging and aban­don­ment (P&A) oblig­a­tions of Cox Oper­at­ing L.L.C. (the Com­pa­ny”).
  • The Com­pa­ny was a large inde­pen­dent oil and gas pro­duc­ers in the Gulf of Mex­i­co (GOM) which filed Chap­ter 11 in May 2023 due to unsup­port­able amounts of debt and inad­e­quate cash flow.
  • The Com­pa­ny was a com­plex estate with many cred­i­tor class­es. The Company’s owned and oper­at­ed thou­sands of wells spread through­out the GOM, as a result of var­i­ous acqui­si­tions, and the assets were held in sev­er­al sub­sidiaries. Many of the wells, plat­form struc­tures, and pipelines had com­pli­cat­ed and vary­ing amounts of own­er­ship inter­ests owned by oth­er pro­duc­ers and had var­i­ous pre­de­ces­sors in the chain of title with poten­tial lia­bil­i­ty for a mul­ti-bil­lion-dol­lar P&A cost.
  • P&A lia­bil­i­ties tra­di­tion­al­ly accrue first to the cur­rent oper­a­tor (the Com­pa­ny) then to pre­de­ces­sors. The Com­pa­ny was the ben­e­fi­cia­ry of numer­ous sure­ty bonds it had been required to obtain to pro­tect the US Gov­ern­ment and pre­de­ces­sors in title from some of the P&A costs.
  • Chiron’s Finan­cial Advi­so­ry Scope:
    • Assess the Client’s poten­tial pay­out risk, includ­ing petro­le­um engi­neer­ing review, P&A cost review, and finan­cial modeling
    • Ran finan­cial sce­nar­ios with dif­fer­ent prod­uct pric­ing, P&A costs, and var­i­ous future own­er­ship asset grouping
    • Devel­op, togeth­er with Client’s bank­rupt­cy coun­sel, strate­gies to mit­i­gate bond­ing expo­sure if possible

OUT­COME

  • Many Com­pa­ny prop­er­ties were unable to cov­er oper­at­ing expens­es, and pur­chase pro­pos­als were small and exclud­ed uneco­nom­ic assets
  • The Com­pa­ny con­vert­ed in Feb­ru­ary 2024 from a Chap­ter 11 reor­ga­ni­za­tion to a Chap­ter 7 liquidation
  • Nonethe­less, Chiron’s high­ly gran­u­lar analy­sis enabled our Clients to focus on assets with eco­nom­ic life and to esti­mate, man­age, and reduce pay­outs, like­ly by amounts equal to a large mul­ti­ple of Chiron’s compensation

Is your com­pa­ny per­form­ing like it should?

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