Pro Tips for Oil & Gas Restructurings Tips for Oil & Gas... · Presentation for educational...

Pro Tips for Oil & Gas Restructurings

Jay Goldfarb, PhD / Big Sky Energy Advisors

Matt Nelson / Wells Fargo Bank

Kristi Chickering / Armory Energy Partners

Hugh Ray / McKool Smith

Moderator: Allen Soong / Armory Strategic Partners

Your Panelists

Jay Goldfarb, PhDBig Sky Energy AdvisorsCo-Founder & CEO

• Transaction advisory to North

American oil & gas producers

• $2B in M&A and placements;

from $10M to $300M

• Registered broker/dealer,

FINRA member

ENERGY

Matt NelsonWells Fargo BankEVP, Head of Credit ResolutionGroup, Wholesale Banking

• 3rd-largest US bank by

assets, $1.8T

• Wholesale Banking segment

serves large and middle-

market companies

Kristi ChickeringArmory Energy PartnersCEO, Sirius Solutions

• Consulting and restructuring,

serving the energy industry

• Over 100 energy clients in 45

countries

• Over 300 professionals;

Houston, Dallas, London

Hugh RayMcKool SmithPrincipal, Head of National

Bankruptcy Practice

• National practice serving

Fortune 500 and middle

market clients, including

debtors, creditors, trustees

• Finance Monthly’s

“Insolvency and

Restructuring Firm of the

Year” in 2011 and 2012

Today’s Agenda

• Capital Markets Update – Jay Goldfarb

• OCC Handbook Changes – Matt Nelson

• Drilling Into Internal Liquidity Sources – Kristi Chickering

• Intro: So. District of Texas Bankruptcy Court – Hugh Ray

Presentation for educational purposes only; not a recommendation for a particular security or investment strategy

Summary

US unconventional oil production grows 5 million b/d in five years passing Russia and Saudi Arabia to make the US the world’s top producer

US unconventional producers spend ~$130 billion /yr. on drilling and completion creating a proliferation of service, distribution and equipment manufacturing businesses on downstream value chains

Profits plunge with oil prices, cash flow is directed to debt service, companies slash investment and expenses, devastating firms on downstream value chains

Tight credit, unanticipated changes to banking regulations and restrictive debt and equity capital markets spread distress to otherwise healthy companies and inhibit a cyclical recovery

The healthiest leveraged companies are deleveraging by selling assets and raising equity while weaker companies restructure, in-or-out of court, or liquidate

The industry’s capital stack is beginning a process of migrating from the balance sheets of regulated institutions

Outspend by Category (% of Cash Flow)

2014 Total Petroleum and Liquids

HZ drilling & Fracking


Upstream Oil & Gas Industry Top Public Issuers

Tight credit and restrictive capital markets pressure healthy firms to enhance liquidity by raising equity and cutting spending and investment.

Capital available for “haves” – no option for “have nots” other than

asset sales

Follow-on equity markets closed to issuers less than S&P “BB” – no IPO

market

Fixed income markets closed to all but investment grade issuers

Regulated Institutions – 50 to 75% of RBL energy loans are substandard or

worse

Issuer

Market

Cap. M$

Total

Enterprise

Value (M$)

Total

Debt/ LTM

EBITDA

S&P

Rating

Fixed Income

Offerings (M$)

Follow-on

Equity

Offerings (M$)

Exxon Mobil Corporation (NYSE:XOM) 389,118 433,691 1.6x AA+ 12,000 -

Chevron Corporation (NYSE:CVX) 196,292 230,921 2.6x AA- 6,800 -

Anadarko Petroleum Corporation (NYSE:APC)28,017 48,476 8.1x BBB 2,996 -

ConocoPhillips (NYSE:COP) 53,882 78,482 5.8x A- 2,994 -

Occidental Petroleum Corporation (NYSE:OXY)57,792 62,224 1.7x A 2,738 -

Total 27,527 -

Pioneer Natural Resources Co. (NYSE:PXD)25,510 26,674 3.2x BBB- - 2,219

Devon Energy Corporation (NYSE:DVN) 19,624 34,726 4.5x BBB - 1,294

Marathon Oil Corporation (NYSE:MRO) 13,291 18,500 5.3x BBB- - 1,109

EQT Corporation (NYSE:EQT) 13,703 17,941 2.0x BBB - 1,084

Hess Corporation (NYSE:HES) 18,876 22,933 3.8x BBB- 500 975

Cabot Oil & Gas Corporation (NYSE:COG) 12,011 13,035 3.4x - - 880

Antero Resources Corporation (NYSE:AR) 7,993 14,018 2.3x BB - 753

QEP Resources, Inc. (NYSE:QEP) 4,371 5,948 3.0x BB+ - 697

Newfield Exploration Co. (NYSE:NFX) 8,629 10,521 2.9x BB+ - 675

Total 500 9,686

Top 2016 Fixed Income Issuers

Top 2016 Equity Follow-on Issuers

Upstream Oil & Gas Year-to-Date June 30, 2016 Top Public Issuers

Source: S&P Capital IQ, as of July 1, 2016


Nearly two years of falling investment has finally eliminated excess supply, but record crude inventories, a strong dollar and slow economic growth are holding back crude prices, further prolonging the industry down-cycle.

Crude Oil Supply

Capital investment has been slashed, onshore and offshore.

US Production is down 1.1 mmb./d, or 12%, year-over-yearGlobal crude markets have swung from a 2 MBD oversupply in January 2015 to a deficit and inventories are falling.

Oil prices are up 50%+ year-to-date.

Record oil storage and macroeconomic factors are restraining prices.

Stabilizing output will require $3 trillion in capex globally during the 2016 – 2020 period.

Industry raised debt capital based on $100/bbl. oil and remains over-levered at $50/bbl.

Industry is currently absorbed by balance sheet repair in an atmosphere of tightening credit.

Change in Upstream Spending

2015E2004

US Crude ProductionUS Crude Inventories

Source: J.P Morgan

Source: Bank of America

Merrill Lynch

Source: Bank of America

Merrill Lynch


Emergence and Growth of US Unconventional Crude Supplies

2004 to 2010

Evolution of Horizontal Drilling & Fracture

Stimulation

• Technology

unlocks vast

onshore oil &

& gas reserves

reserves

• Majors stay

focused

offshore

• Independents

s explore in

ND, TX, OK,

PA, OH, WY,

LA.

2010 to 2014

Debt fueled growth led by

independent US companies

•US production

nearly doubles

•Growth nearly all

all independents

independents

(CLR, HESS, EOG

EOG & Others)

• Industry raises

nearly $1T of

debt outspending

outspending cash

cash flow by 1.8x

1.8x

•By 2014, US

overtakes Saudi

Arabia to become

become the

worlds largest

producer

2015/2016

Oversupply, commodity price

collapse and widespread

defaults

•Markets become

become

oversupplied

•Saudi Arabia sets

sets out to

destroy US shale

shale producers

•Oil prices plunge

plunge

•Asset values and

and investment

investment

decline

•Bank regulators

tighten lending

standards

US Unconventional Plays

Global Crude Production Growth

2008 2016E

Source: Tudor Pickering Holt & Co.

The current downturn is rooted in industry structural changes, precipitated by the

growth of unconventional onshore US production, led by independent exploration &

production (E&P) companies and fueled by debt.

Source: Energy Information Administration

US Unconventional Plays

US unconventional producers are capable of rapidly modulating production and have almost certainly replaced OPEC as the global swing producer which will have lasting ramifications for the industry capital stack.

Onshore Unconventional

• $5 to $10 million per well

• First production within 90 days of permitting

• 500 to 1,000 barrels/day

• High decline rate

Offshore Gulf of Mexico

• $1 billion plus per project

• Minimum 3 years from permitting to first production

• 50,000+ barrels/day

• Lower decline rate



Exploration and Production (E&P) Investment Down-Cycle and Oil-Field Services (OFS)

E&P Companies

Rates for oil-field

services cut

CAPEX cut – freeing cash flow for debt service

Lower hydrocarbon reserve value reduces borrowing base

Raise equity, restructure debt or sell assets to de-lever

In event of insolvency, restructuring likely,

converting junior debt to equity

OFS Companies

Revenue and gross margins decline

Large share of industry employees on OFS payroll

– Headcount Reduced

Equipment idle – little value for used equipment

Debt service consumes cash flow

In event of insolvency, senior debt impaired and

liquidation likely

Commodity Price

E&P Asset Value

E&P Capital Investment

Upstream Service Rates

Upstream Service

Capacity

Oil & Gas Production

Managing The Down-CycleUpstream Investment Cycle

Exploration and production (E&P) firms survive down-cycles by reducing CAPEX to free

cash flow for debt service. Reduced upstream investment eliminates a key source of

revenue for the oil field service (OFS) segment leaving these firms unable to service debt.


Oil & Gas Capital Markets

Sources: S&P Capital IQ, OCC 2015 Shared National Credit Review and internal estimates

Over the last five years, many industry firms investing in shale have accessed billions of dollars in public debt markets in unsecured notes, significantly increasing their total leverage.

Source: J.P. Morgan

2015 CAPEX survey

National oil companies (NOCs) and international oil companies (IOCs) like ARAMCO and Shell are responsible for the majority of global crude production. Replacing their existing reserves accounts for the majority of global spending.

NOCs and IOCs fund from cash flow and their capital structures include debt raised in fixed income markets.

Growing independent oil companies substantially outspent cash flow and raised growth capital from senior debt, private equity, public equity offerings and ~$300B from high-yield bonds.

Growth of the independent exploration sector spawned a proliferation of independent service companies focused on particular geographies, customers and services.

US Upstream Capital Market Activity since 2010

$160BPrivate Equity

$200B

Public Equity Offerings

$354B

Bank Loans

$600B

Fixed Income Securities


Debt Capacity the Exploration & Production Industry

Ratio PassSpecial

Mention

Substandard or

Worse

DefinitionPotential

Weakness

Well-defined

Weaknesses

Funded

Debt/EBITDAX<3.5X 3.5-4.0X >4.0X

Funded

Debt/(Funded

Debt + Equity

Capital)

<50% 50-60% >60%

Committed

Debt/Un-risked

& Undiscounted

Proved

Reserves

<65% 65-75% >75%

EBITDAX is defined as earnings before interest, taxes, depreciation and amortization

with depletion, exploration, and abandonment expenses added back.

Energy lenders participate in senior loans secured by the oil & gas reserves of public debt

issuers. Senior debt exposes these firms to borrowing base redeterminations and

changing credit standards imposed by regulatory agencies.

OCC March 2016 Guidelines for Oil and Gas

Lending2009 to

2010

• Oil plunges from $130/bbl. to $30

• E&P firms with senior debt sell assets or raise equity to cure borrowing base deficiencies.

2011 to 2014

• Larger firms increase leverage by issuing high-yield unsecured bonds and utilize revolver availability as a source of liquidity.

2015

• Borrowing base redeterminations cause defaults for firms with funded senior debt.

• High borrowing costs cause defaults for firms funded by high-yield bonds.

2016

• Firms look to undrawn revolvers for liquidity but pressure from regulators cause banks to restrict availability forcing more defaults.

• Restrictive guidelines for banks discourage holding sub-standard loans through the cycle, pressuring borrowers to sell assets or raise equity.

• In the event of restructuring, junior debt typically owns the firm.


Oil & Gas Capital Markets

Availability of Capital for the US Upstream Oil & Gas Industry

Senior Debt

• Tight standards limit

direct lending

• New loans participating in

participating in PE deals

deals

• Weaker borrowers require

require PE backing

• Regional banks above 5%

5% portfolio limit for oil &

oil & gas lending

• Non-bank lenders costly

costly for lower quality

borrowers

Bonds

•Low rates and long

duration highly

attractive to investment

investment grade

issuers

•High-yield spreads

close markets to

speculative issuers

Private Equity

•$150B+ dry powder

•Most active acquirer of

of industry assets

•Sponsor mgmt. teams

teams hunting for

assets

•Sponsor emerging

growth companies with

with control equity

•Joint Venture

participation with

established operators

operators

Public Equity

•Stock prices up

significantly year-to-

date

•2016 follow-on market

market active for

issuers with BB

minimum

•June 22, 2016, 1st E&P

E&P IPO in more than a

than a year

Industry capital is moving off the balance sheets of regulated institutions. The primary

sources of capital are asset sales, issuing public equity, private equity and unregulated

lenders.

Today’s Agenda





OCC Handbook

• In March 2016, the OCC published updated guidance to

banks regarding oil and gas lending.

• The publication is called Comptroller’s Handbook: Oil and

Gas Exploration and Production Lending.

• It is publicly available. See

http://www.occ.gov/publications/publications-by-

type/comptrollers-handbook/pub-ch-og.pdf

Discussing OCC Guidelines on Risk Rating

Classifications

Assigning Regulatory Loan Ratings

• The OCC reorganized this section to more clearly lay out the criteria for the various loan ratings, though it cautioned that these criteria are not meant to be construed as bright linesPass Special Mention Substandard / Doubtful Loss

Repay Committed Bank Debt from operating cash flow <60% of Reserve Life >60% < 75% of Reserve Life > 75% of Reserve Life > 100% of Reserve Life

OR

Repay Total Secured Debt from operating cash flow <75% Reserve Life >75% < 90% of Reserve Life > 90% of Reserve Life > 100% of Reserve Life

Funded Debt / EBITDAX ≤ 3.5x > 3.5x ≤ 4.0x > 4.0x N/A

Funded Debt / (Funded Debt + Equity) ≤ 50% > 50% ≤ 60% > 60% N/A

Committed Debt / Total Unrisked Undiscounted 1P Cash Flow ≤ 65% > 65% ≤ 75% > 75% ≤ 100% > 100%

Special Mention Rating Classifications

• Borrower has a potential weakness – if uncorrected, could lead to

a well defined weaknesses and deterioration in the repayment

capacity

• Continued financial underperformance to management’s plan

• Advance rates or reserve mix category exceeds policy limits or

industry standards

• Liquidity and cash flow begin to deteriorate and are marginally

sufficient in funding projected operations or capital plan

• Continued history of an over-advanced borrowing base

Substandard Rating Classifications • A substandard RBL is inadequately protected by the current paying

capacity of the borrower

• Borrower has a well defined weakness leading to a higher probability of a payment default

• Borrower continues to be in covenant default with need of an amendment to reset or restructure the loan

• Operational cash flow has significantly deteriorated and total debt repayment is insufficient

• The borrower’s total committed debt is greater than 75% of the total unrisked and undiscounted proved reserves

• The borrower may be dependent on asset sales or other secondary sources of repayment to repay debt

Non-Accrual Designation

• A loan should be moved to non-accrual in the event that:

• Payment of full principal or interest is not expected; or

• Principal or interest have been in default for greater than 90 days

• In cases with multiple loans to the borrower, structured as

pari-passu and supported by same underlying assets, a

designation to non-accrual should carry across all of the

loans

Doubtful Loan Rating Classifications

• The remaining balance of a borrowers loan secured by the

NPV of unrisked proved reserves should be classified

doubtful when the potential for full loss may be mitigated by

the outcome of certain pending events

• A doubtful rating is also warranted when a loss is expected,

but an amount cannot be reasonable determined

• The borrower’s loan balance should not exceed 100% of the

unrisked NPV of proved reserves

Deriving a Loss

• The portion of the loan balance that exceeds 100% of the

unrisked NPV of proved reserves, and is deemed

uncollectible, should be classified as a loss

Updated Lending Guidance

Updated E&P Lending Structure

• Standard Revolver terms reduced from 3-7 years to 3-5

years

• OCC now specifies typical covenants necessary for RBLs,

which include the following

– Maximum Sr. Funded Debt or Total Debt / TTM EBITDA(X) at 3.5x

and 4.0x, respectively;

– Minimum TTM EBITDA(X) / Interest Expense of 2.5-3.0x; and

– Minimum Current Ratio of 1.00-1.25x

Establishing the Borrowing Base

• New OCC guidance states that banks should perfect liens

on reserves representing 75-90% of economic value in the

borrowing base

• Single well concentration should not exceed 15-20% of the

borrowing base

• Non-Producing reserves should be limited to 25-35% of the

borrowing base valuation

Establishing the Borrowing Base (cont.)

• Borrowing bases should be reset every six months based

upon updated engineering

• Borrowers are required to cure any over-advance /

deficiency in equal payments evenly over six months and

that the next subsequent borrowing base will be conforming

• An over-advance does not result in an adverse rating

Risking of Reserves

• The OCC enhanced its guidance regarding the risking of reserves

in connection with each borrowing base redetermination

Previous OCC Guidance New OCC Guidance

• Borrowing base should be based primarily on PDP reserves with at least 6 months of production history

• No other specifications on appropriate risking methodology of non-producing reserves

• 100% of seasoned (producing ≥ 6 months) PDP reserves

• 90-95% for unseasoned (producing < 6 months) PDP reserves

• 65-70% for PDNP reserves• 25-50% of PUD reserves

Leveraged Lending / Repayment

Requirements

• Modified the repayment test used for Leveraged Loans

relating to RBLs

• Ability to repay an RBL is assessed relative to the economic life of

the reserves as opposed to the 5-7 year test previously used in

connection with the general Leveraged Lending guidance

• Repayment of an RBL’s commitment should occur within 60% of the

economic life of the reserves (or 120% of the reserves’ ½ life) and

within 75% of the economic life for total debt

Today’s Agenda



• Drilling Into Internal Liquidity Sources – Kristi

Chickering


Objective & Agenda

Objective:

Share our learnings on identifying internal liquidity sources, focusing on cost

reductions.

Agenda:

1. Case Study 1: Reductions in Human Capital and Third-Party Spend

2. Case Study 2: Reductions in G&A and Lease Operating Expenses

Case Study 1: Publicly Traded Midstream MLPReductions in Human Capital and Third-Party Spend

TRIGGER EVENT:Client estimated

bankruptcy risk in their client base

1. Cost Reduction Objective =$10M (end of Q1) +

$10M (run rate) (end of Q2)

1. Framed Objective2. Determined Feasibility3. Identified Key Actions4. Established Timeline

2. Feasibility =Reduce Human Capital +

Third-Party Expenses

3. Key Actions =Identified by Sirius Multi-

Disciplined Team in collaboration with Sr. Mgmt.

Hired Sirius

Mid-Feb. 2015

4. Complete by Q2 2015 close

Case Study 1: Publicly Traded Midstream MLPPhase 1: Focus on Human Capital Cost Reduction

Actions:1. Flash reporting developed indicating timing of key HR

expense components2. Essential outputs by individuals determined3. Based on above, executed reduction in human capital

Feb. 28Mid-Feb.

Cost Reduction Objective =$10M (end of Q1)

March 31

Cost Reduction Impact =$17M (end of Q1)

Case Study 1: Publicly Traded Midstream MLPPhase 2: Focus on Reduction in Third-Party Expenses

Actions:1. Mapped spend by vendor (type, timing)

over prior 12 months2. Determined opportunities (e.g. rate

renegotiations)3. Renegotiated or eliminated contracts

Feb. 28Mid-Feb.

Cost Reduction Objective = run rate of $10M (end of Q2)

April 1

Cost Reduction Impact =run rate $27M (end of Q2)

June 1

Case Study 1: Publicly Traded Midstream MLPReductions in Human Capital and Third-Party Spend

1. Frame Objective2. Determine Feasibility3. Identify Key Actions4. Establish Timeline

APPROACH

1. Data Analysts2. Cost Analysts3. Forecasters4. LEAN Six Sigma Black

Belts5. Facilitators

MULTI-DISCIPLINED TEAM

Cost Reductions of $44MM

(220% of goal)

Case Study 2: Publicly Traded Off-Shore

Upstream Energy Company Reductions in G&A and Lease Operating Expenses

TRIGGER EVENT:Client was concerned

about the decline in the commodity price plus the amount of debt they were carrying; together these put them into a potential

bankruptcy situation

1. Quickly gain visibility into key expenses in order to

reduce overall costs, improve liquidity and service debt1. Framed Objective

2. Determined Feasibility3. Identified Key Actions4. Established Timeline

2. Feasibility =Reduce LOE and G&A

3. Key Actions =Identified by Sirius Multi-

Disciplined Team in collaboration with Sr. Mgmt.

Hired Sirius end of Nov. 2014

4. Complete by Q1 2015 close

Case Study 2: Publicly Traded Off-Shore Upstream

Energy Company Phase 1: Focus on G&A Reductions

Actions:1. Developed data hierarchies 2. Extracted data from multiple functional areas and systems3. Created a separate database to capture the data and

developed automated, dynamic, customized reporting; enabled diverse user base to drill down via user-friendly interface

Dec. 1End of Nov. 2014

Gain visibility in 30 days into detailed G&A expenses in order

to identify where to reduce

Dec. 31

Cost reduction actions taken using this operational reporting and cost analytics resulted in a

36% Reduction in 2015 G&A

Time to analyze costs reduced from 4-6 months post-

spend to real time

Case Study 2: Publicly Traded Off-Shore Upstream

Energy Company Phase 2: Focus on Reduction in Lease Operating Expenses

Actions:1. Extracted data from five different technology systems2. Created a separate LOE database and reporting system

that enabled the production of P&L statements, in real time, for each well

Dec. 1End of Nov. 2014

Gain visibility in 6 weeks into the profitability and expense of each

of the firm’s 2,500 wells

Mid-Feb 2015

Cost reduction actions taken using this operational reporting and cost analytics resulted in a

30% Reduction in 2015 LOE

Time to analyze costs reduced from 4-6 months post-

spend to real time

Jan. 1

Case Study : Publicly Traded Off-Shore Upstream

Energy Company Reductions in G&A and Lease Operating Expenses

1. Frame Objective2. Determine Feasibility3. Identify Key Actions4. Establish Timeline

APPROACH

1. Data Hierarchists and Extractors

2. Database Architects3. Upstream Oil & Gas

Analysts4. Operational Reporting

Experts5. Process Improvement

Professionals

MULTI-DISCIPLINED TEAM

Cost Reductions of 30% for LOE +36% for G&A

In 2015

Development of real-time operational

reporting enabling ongoing efficiencies

Where Companies

Are

Where Companies

Must Be

Closing Thought

Today’s Agenda




• Intro: So. District of Texas Bankruptcy Court – Hugh

Ray

North American Energy Bankruptcy Filings,

January 2015 through June 2016

Source: Houston Business Journal, July 2016

0

5

10

15

20

25

Nu

mb

er o

f fi

lings

Total = 156

North American Energy Bankruptcy Filings,

January 2015 through June 2016


14

233

81

35

Canada

Delaware

New York

Texas

Other

Number of Filings, No. AmericaTotal = 156

Number of Filings, TexasTotal = 81

4

24

19

34

0 10 20 30 40

Eastern

Western

Northern

Southern

Value of Filings, TexasTotal = $27.0B

$0.1

$1.9

$2.0

$23.1

$- $10.0 $20.0 $30.0

Eastern

Western

Northern

Southern

COMPANY DATE $MM

Aurora Operating LLC 1/11 $2.4

MOG Producing LP 1/18 $4.3

Ginger Oil Company 2/4 $6.5

Argent Energy (U.S.) Holdings Inc. 2/17 $51.9

Primrose La Sara LLC 2/17 $4.3

Wellhead Distributors Intl 3/4 $31.7

ESP Petrochemicals, Inc. 3/10 $7.4

East African Drilling Ltd. 3/25 $45.4

Hydrocarb Energy Corporation 4/13 $12.5

Aztec Oil & Gas Inc. 4/13 $1.5

Energy XXI Ltd. 4/14 $2.8B

So. Dist. of Texas Energy Bankruptcy Filings,

2016 YTD


COMPANY DATE $MM

Goodrich Petroleum Corporation 4/15 $444.2

Ultra Petroleum Corporation 4/29 $3.9B

Midstates Petroleum Co. Inc. 4/30 $2.0B

Linn Energy LLC 5/11 $6.0B

Berry Petroleum Company LLC 5/11 $1.7B

SandRidge Energy Inc. 5/16 $4.2B

Hawk Oilfield Service Inc. 5/17 $1.2

Armada Water Assets/Wes-Tex Vacuum Service 5/23 $24.9

Mark A. Martinez LLC 5/24 UNK

Linc USA GP 5/29 $414.4

Warren Resources Inc. 6/2 $486.3

Summary

• As of March 3, 2016, Judge Marvin Isgur and Judge David Jones will hear all of the

Chapter 11 Cases designated as “complex”.

• The threshold for “complex” is very low--$10 Million in debt.

• Complex cases can be self-set for hearing (even emergency hearings) on any day of

the week.

• Overall, Delaware and New York remain more hospitable to structured dismissals or

section 363 sales followed by conversion than the Southern District of Texas.

• Sub rosa plans

• Texas is more favorable towards involuntary filings and allowing committees to bring

estate causes of action.

Judge Marvin Isgur

• Business background (MBA); successfully operating real estate ventures and teaching

business courses at the University of Houston.

• He stated his ultimate goal was to become a bankruptcy lawyer.

• After the ATP Oil and Gas case, Judge Isgur has refused to sign a “traditional” cash

collateral/DIP order. Instead, he signs a simple order that he himself types in open court.

• DIP Loans receive DIP protections for new money only.

• The United States Trustee counsel for Judge Isgur’s cases is retiring to Wisconsin soon.

Judge David Jones

• Judges Isgur and Jones practiced law together.

• Judge Jones was active in the tech industry and made a second career of the practice

of law.

o Evidentiary rules

• In contraposition to Judge Isgur, Judge Jones will sign complex cash collateral/DIP

Orders that include “roll-up” of prepetition debt and strict default triggers.

• Like Judge Isgur, Judge Jones will expect a DIP Loan to provide the opportunity for a

plan confirmation.

• Select by filing a case in the Victoria Division.

o No one has yet challenged the divisional selection of Victoria in a complex chapter 11.

• United States Trustee

• Fees

• Mediation

- Both favor mediation and will often mediate each other’s cases.

• Section 503(b) substantial contribution claims

• Non-Debtor releases

Bankruptcy Practice

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