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CHAPTER 5 HARD TIMES CASE STUDY
Jurisdiction | United States |
(May 1986)
HARD TIMES CASE STUDY
FACTUAL HISTORY
Hoosier Oil Company (the "Company") is a Denver oil and gas company engaged in exploration and production. The Company owns substantial amounts of developed and undeveloped oil and gas properties in several states and it is the sole general partner of several public limited partnerships which were formed in connection with drilling many of its prospects.
The major development property of the Company is the Golden Spike Field in San Juan County, Utah. This field contains fee, federal and Indian leases. The Company owns a 25% interest in the field (with the exception of one well) and is the operator of all wells in the field under a standard A.A.P.L. Form 610-1982 operating agreement. Two of the Company's partnerships own beneficial interests in the field, Hoosier Drilling Programs 1983 and 1984 each owning 12-1/2%. Record title to the interests of the Programs is held by the Company pursuant to a nominee agreement. The remainder of the interests in the Golden Spike Field are owned by Muscle Petroleum, a major oil company with a 35% interest, and several small independent producers with a total of 15%. These independent producers are old cronies of the founder of the Company, Robert ("Bobby") Night, and because of their long relationship with Night, the Company also holds record title to their interests in the field. The exception to this ownership pattern is the Golden Spike #5 well, in which the Company's interest was assigned to Mr. Night, its sole shareholder, in February, 1986 in exchange for cancellation of a $250,000 debt owed to Night.
The drilling history in the field is mixed. The Golden Spike wells #1 through #5, drilled in 1983 and 1984, were all producers. In June, 1985, the Company drilled the Navajo #1, a dry hole at a total cost of $400,000. In September, 1985, the Navajo #2 was drilled and completed as a producer, at a cost of $800,000. There are also several valuable proved undeveloped drilling locations in the field, including a prime location designated as the Navajo #3.
Because of the continuing decline in oil and gas prices, the Company is experiencing serious cash flow problems. The 50% share of the drilling costs of Muscle and the independents for the Navajo #1 and #2 has been paid to the Company which did use it to pay drilling expenses, but the
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Company has been unable to pay...
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- Problems and Opportunities During Hard Times in the Minerals Industry (FNREL)
- TABLE OF CONTENTS
- CHAPTER 1 AN OVERVIEW OF RESTRUCTURING
- CHAPTER 2 THE INCEPTION OF A CASE
- CHAPTER 3 BANKRUPTCY: THE TRUSTEE'S AVOIDING POWERS, LIEN PRIORITIES AND CONSTRUCTIVE TRUSTS
- CHAPTER 4 EXECUTORY CONTRACTS AND THE PLAN OF REORGANIZATION
- CHAPTER 5 HARD TIMES CASE STUDY
- CHAPTER 6 OPERATIONAL AGREEMENTS IN THE SHADOW OF BANKRUPTCY--WHAT CAN BE DONE TO STRUCTURE AGREEMENTS IN ORDER TO MINIMIZE THE PROBLEMS OF A PARTY THAT LATER GOES BANKRUPT
- CHAPTER 7 PURCHASING OIL AND GAS AND MINING PROPERTIES FROM DISTRESSED PARTIES
- CHAPTER 8 KEEPING OIL AND GAS LEASES ALIVE A REVIEW OF BOTH THE MINERAL LESSEE'S OBLIGATIONS AND POSSIBLE WAYS TO KEEP LEASES IN EFFECT
- CHAPTER 9 MANAGEMENT OF MINING PROPERTIES (HOW GREEN WAS MY MONEY?)
- CHAPTER 10 MAINTAINING MINING PERMITS|GOVERNMENT AUTHORIZATIONS AND WATER RIGHTS
- CHAPTER 11 GETTING PAID FOR OIL AND GAS PRODUCTION
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