A recent report on decommissioning provides up-to-date predictions for the future costs of dismantling infrastructure in the United Kingdom Continental Shelf. It is the first financial estimate by the Oil & Gas Authority (OGA) since the regulator was established in 2016. The methodology used is different from that of previous surveys.
The report is noteworthy in its application of the new statutory requirement of Maximising Economic Recovery (MER). As applied to decommissioning, this requires that persons undertaking an activity must do so in a cost-effective way. This includes employing new and emerging technology. The report emphasizes the potential to reduce costs by the application of MER.
(Houston) – Lawyers and advisors at Akin Gump held a briefing today, titled “The Global Energy Industry: A Look to the Year Ahead in 2017,” addressing some of the big issues likely to affect the global energy industry in the coming year. The event was held as an in-person briefing in the firm’s Houston office and as a webinar for participants around the world.
Globe Law & Business, in its new book Oil and Gas Sale and Purchase Agreements, has included several chapters written by Akin Gump lawyers. The chapters and their corresponding authors are as follows:
- “Conditions precedent and deferred completions,” by oil and gas partner John LaMaster
- “Oil and gas warranties,” by oil and gas counsel Caroline-Lucy Moran
- “Environmental provisions in upstream acquisitions and divestitures,” by environment and natural resources partner emeritus Paul Gutermann
- “Decommissioning,” by oil and gas counsel Nicholas Antonas and partner Marc Hammerson
- “Anti-corruption provisions,” by international trade counsel Nicole D’Avanzo and partner Tatman Savio
- Oil and gas boilerplate provisions,” by John LaMaster
As the spate of energy bankruptcies continues, trustees, shareholders, creditors, plaintiff’s firms and other interested parties are looking at ever more creative ways to maximize the recovery for their constituency or fight against total loss. In a growing number of cases, this includes casting a critical eye on deals and the actions of officers and directors from years before. Many directors, particularly independents and those appointed by financial sponsors, had little to worry about during the boom times when every deal seemed to be a home run and they took comfort in “knowing” that there was a directors and officers liability insurance (D&O) policy to back them up if something went wrong. However, as parties scrutinize deals through the lens of hindsight with big dollars on the line and lightly-read policies are dusted off, many directors may find that, in bankruptcy, their D&O policy may not really be there for them.
With the extended collapse in energy prices, many exploration and production (E&P) producers are now focused on not only adjusting their own drilling activities, but also on carefully assessing their partners’ financial positions, given that the bankruptcy filing of a joint venture partner (whether operator or nonoperator) can lead to substantial problems for the other joint venture partner(s) and potentially hamstring operations on the co-owned lands. For example, the automatic stay applicable during a bankruptcy proceeding generally prevents nondebtor partners from exercising their contractual rights and remedies under their agreements (i.e., joint operating agreements, joint development agreements, participation agreements, etc.) with the debtor. In such situations, non-debtor producers may not be able to recover any advance payments made to the joint venture and may lose the right to offset such amounts against their continuing JIB obligations. In addition, the agreements governing a joint venture generally can be rejected in bankruptcy. If that happens, nondebtors can be required to treat the debtor partner as a co-tenant subject to the common law of co-tenancy and thus be required to fully carry the debtor with respect to continuing operations. To make matters worse, a nondebtor may be required to assume the plugging and abandonment (P&A) obligations of the debtor partner. Contracting around these risks prior to a bankruptcy often leads to arrangements that are ultimately unenforceable in bankruptcy. However, there are steps that producers can take today that may better position them should a joint venture partner enter bankruptcy. Set forth below is a list of some action items that E&P producers should consider:
Part One — Vendors at the Gates
As sub-$30 oil prices continue to place mounting pressure on struggling energy companies, we are seeing a steady uptick in claims by unpaid vendors and suppliers. Creditors that historically may have been amenable to extended payment terms for preferred customers — and would have never thought twice about the possibility of suing a customer — are becoming increasingly more aggressive. Some have started to turn to litigation for recourse.