What Happens if a company that you are leased with goes bankrupt

Several of the operators in the Haynesville Shale are struggling financially. If one does go bankrupt, will royalty checks continue uninterrupted. Just how would a bankruptcy affect everything

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Permalink Reply by JMan on July 2, 2015 at 5:15

Not a typo.  lol

Permalink Reply by Gale on July 7, 2015 at 10:58
And TC for those vary reasons I wish Samson would file. It's really hard to prove that a oil company is not paying right. BUT I've been in this game long enough to recgonize something isn't right with them since they sold to KKR. There has been talk of bankruptcy and honest I wish they would just do it.
Permalink Reply by Keith Mauck (Site Publisher) on July 2, 2015 at 12:54

Interesting chart from the fitchratings link, click it to enlarge

Permalink Reply by kittycatmama on July 2, 2015 at 15:46

Let me make this more complicated. Say you are leased with Company A and it is NOT the operator. Company B is operator and Company B files bankruptcy. We could see companies file BK  if the market does not improve, so all of us could be facing these situations.

Permalink Reply by Cynthia Garrison Payne on July 4, 2015 at 7:26
A company went bankrupt that I was getting checks from they still owe me around $20,000. It has been 10 years trying to get my money
Permalink Reply by William Howard Pritchartt on July 7, 2015 at 14:17

If an operator owes money to a creditor for goods and/or services the creditor is payed by the bankruptcy court ordered sale of assets to recover what usually is pennies on the dollar rarely the full amount owed.  However, this does not apply if the operator is paying royalties on production of oil and gas.  This money belongs to the royalty owner(s) not the operator distributing the proceeds of sales of a product that cannot be diverted or interrupted except by shut-in agreement or other provision by contractual agreement or amendment to the lease between the parties.  If the operator has misappropriated your royalty payment the operator is guilty of embezzlement being a felony and punishable by fine and incarceration.

I had an operator attempt this once and after giving them an education on the consequences by certified mail, the royalties soon followed as they should without further problems.

Sick'em!!!!!!!!

 

 

Permalink Reply by Leo Schumacher on July 7, 2015 at 14:28

Thank you for this information. Does this concept apply in all states?  Should the operators be required to pay interest on the overdue royalties?

Permalink Reply by Cynthia Garrison Payne on July 8, 2015 at 1:54
My attorney has written and called with no luck. I will try again. Thank you
Permalink Reply by Leo Schumacher on July 7, 2015 at 11:19

Maybe I missed this discussion point, but many gas companies lag their royalty payments by 6, 12, or even 18 months, even though they are not entitled to do that.  If the company files for bankruptcy and is 18 months behind in their royalty payments, my understanding is that all of those mineral royalties are permanently lost unless there is some remaining assets available from the bankruptcy proceeding after the senior creditors get their share.  I am quite worried that my company, which has made no payments at all to date, will continue to produce gas and then file bankruptcy without paying for those produced minerals.

Permalink Reply by Krkyoldhag on July 7, 2015 at 11:50

I wonder if this would be considered "unsecured" debt?  I do know that you can file a claim for payment (when percentages are figured) with the court.

I am suspecting that our rights as mineral owners after leasing are about as valid as a gambler's protection by the Gaming Commission.  NIL.

But if Itochu can write down 3 billion in just 3 years who lost the money?  Creditors?

Permalink Reply by William Howard Pritchartt on July 7, 2015 at 15:18

I speak from my experience that was in Wilkinson County, MS.  I know in Louisiana unlike Mississippi the operator is required to pay royalties within, I believe, three months after a well goes on line.  Payments from sales should be made monthly from sales the month before.

I would consult the Louisiana Attorney General's Office or your local D.A.

Permalink Reply by Leo Schumacher on July 7, 2015 at 15:32

Thank you!

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