Case Studies
Insurance Company and a Syndicate of Several Insurance Companies
Oil & Gas

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