“5 Pitfalls For Purchasers Of Distressed Oil, Gas Assets”
With oil prices stubbornly in the $30-per-barrel range and showing little sign of recovery, energy attorneys are bracing for a wave of asset sales from cash-strapped companies desperate to stay afloat or bankrupt firms looking to pay off their creditors.
That includes identifying what the ongoing obligations are as a member of that joint venture, such as drilling a certain amount of new wells or putting up a certain amount of cash for development or maintenance. Those are things a cash-strapped seller may not be doing, said Richard Hemingway Jr., who leads Thompson & Knight LLP’s oil and gas practice.
“It’s important for a buyer to know that its seller is meeting its obligations under the JOA,” Hemingway said. “Failure to do so creates claims in favor of other operators.”
Given the current state of oil prices, those buying into a joint venture also have to worry about the financial health of their new partners.
“That can create a host of problems with the value and the ongoing administration of your asset,” said Hunter White, who co-chairs Thompson & Knight’s energy industry group.