Rockdale Marcellus, LLC – With the Imminent Closing of the $220 Million Sale of Repsol, Seeks to Extend Exclusivity Period to File Liquidation Plan; Major Unsecured Creditors Prefer Immediate Post-Sale Case Conversion | Daily updates from bankrupt companies

January 18, 2022 – The Debtors have filed a motion to extend the periods during which they have the exclusive right to file a Plan and seek acceptance thereof until March 7, 2022 and May 6, 2022, respectively [Docket No. 678]. Absent the requested exemption, the plan’s filing and solicitation periods are scheduled to expire on January 19, 2022 and March 20, 2022, respectively. This is the Debtors’ first request for exclusivity extensions.

The debtors, who expect to close their $220.0 million asset sale to Repsol Oil & Gas USA, LLC (“Repsol”) on January 19, see a “potentially consensual conclusion” to their after-sales cases and believe that they “are ready to start moving forward productively with the next stage of these Chapter 11 cases.” Not exactly brimming with the confidence and/or sense of expediency that is often seen when debtors transition to a post-sale liquidation/liquidation plan.

Will they even go to a hearing scheduled for February 17 to consider the extension request?

The first step is a February 3 hearing to consider a motion to convert these businesses upon the closing of the Repsol sale; with this petition filed by creditors claiming to hold 79% of debtors’ unsecured claims. These creditors insist that any effort to advance a plan after the sale is a waste of the debtors’ time and money (see below).

The extension movement

The extension petition explains, “Current exclusive periods do not provide sufficient time for debtors to achieve their objectives in these Chapter 11 cases. to advance these Chapter 11 cases toward discharge, Debtors want additional time to formulate and propose a Chapter 11 plan. potentially consensual conclusion without the deterioration in value that would likely be caused by the filing of competing plans by non-debtor parties. »

The motion continues, “[t]Debtors have made substantial progress to date in these Chapter 11 cases. Debtors have used the first three months of their Chapter 11 cases to maximize the benefits of the Chapter 11 process, including stabilizing the business after petition, pursuing the rejection of binding contracts, achieving several critical milestones such as filing schedules and statements and establishing a pre-petition claims deadline and, most importantly, complete an auction process for the sale of substantially all of the debtors’ assets—all to build the framework for a successful Chapter 11 plan. This framework and the results of the sales process could not have been achieved in a shorter time frame. Now that the framework is in place, however, tDebtors are about to start moving forward productively with the next stage of these Chapter 11 cases, including the search for a recovery of certain assets for the benefit of the domains and by negotiating a Chapter 11 plan with their stakeholders.

The debtors have only recently successfully completed a marketing and auction process for the sale of substantially all of their assets. The sale is expected to close on or around January 19, 2022. Once the sale is complete, the Debtors will be able to devote themselves to the development and negotiation of the terms of a liquidation plan using the proceeds from the sale. It will take time lead these discussions and develop the necessary framework for a confirmable Chapter 11 plan. The granting of the requested extension of the exclusive periods will also give debtors a full and fair opportunity to negotiate any modification or revision of a proposed plan without the distraction, cost and delay of a competing plan process.

Motion to convert

On January 10, creditors Regency Marcellus Gas Gathering, LLC (“Regency”) and ETC Aqua, LLC (“ETC Aqua”) filed a motion to have the Debtors’ Chapter 11 matters converted to Chapter 7 matters. [Docket No. 646] immediately following the closing of the Debtors’ sale of substantially all of its Marcellus assets to Repsol Oil & Gas USA, LLC (still scheduled for January 19).

Regency and ETC Aqua, which say they collectively own 79% of debtors’ remaining unsecured claims, argue that Chapter 7 (even with the cost of upgrading a Chapter 7 trustee) would be less expensive than move forward with a chapter. 11 Scheme.

Movement [Docket No. 646] states: “The debtors have now sold all their assets. By January 19, 2022, when the sale is expected to close, the Debtors will have no business to carry on, no physical assets, no claims or causes of action to pursue, and no reason to remain in Chapter 11. Accordingly, the immediate conversion of the Debtors’ cases from Chapter 11 to Chapter 7 of the Bankruptcy Code will best serve the interests of the Debtors’ few remaining creditors.

Debtor Restructuring Director John DiDonato testified at the sale hearing that following the sale process, the estate will be liquidated and the debtor entities dissolved. The only other task that will remain is the preparation of taxes.

Mr. DiDonato also testified that the sale raised proceeds of $220 million, which proceeds will be used to pay all secured debt of debtors (estimated at $217 million), $12.2 million in expenses administrative costs and approximately $2 million in liquidation costs. leaving the general unsecured category (made up of approximately $32.6 million in claims) with a meager $1.95 million [no, we don’t understand the math either].

At first glance, Regency and ETC Aqua are two of four remaining general unsecured creditors in these cases and collectively hold approximately 79% of the remaining unsecured claims against the Debtors. As such, their collection will be most impacted by the actions of Debtors after closing. Accordingly, debtors and their trustees must proceed in a manner that maximizes their return and act only in their best interest. In the absence of any justification for these cases to remain in Chapter 11, and In order to preserve funds that would otherwise be expended to pursue a liquidation plan, it would be in the interest of the debtors’ remaining creditors to convert these Chapter 11 cases to Chapter 7 cases of the Bankruptcy Code immediately after the close of the sale.

Sale of assets

On December 29, 2022, following the order of October 21, 2022 on the Court’s tender procedures [Docket No. 297] and an auction held on December 16, the court hearing the Rockdale Marcellus cases approved the $220.0 million sale of debtors’ properties located in Bradford, Tioga and Lycoming counties, Pennsylvania and certain related assets to Repsol Oil & Gas USA, LLC (the “Buyer”) [Docket No. 617]. The Asset Purchase Agreement (the “APA”) governing the terms of the sale is attached to the Order as Schedule 1.

The Buyer, a US subsidiary of Spanish energy giant Repsol, has exploration and production assets in the Gulf of Mexico, the Marcellus shales in Pennsylvania, the Eagle Ford shales in southern Texas, the North Slope in Alaska and the Trenton-Black River in New York.

Business pre-petition Structure

Debtors are organized as LLCs under Title 3 of the Texas Business Organizations Code. RMH is owned by a group of individual and institutional investors, including members of the debtors’ management team, who indirectly own common shares in Rockdale through an aggregation entity known as Rockdale Holdings, LLC. Tsunami Marcellus Partners, LP is RMH’s largest shareholder, owning over 85% of the preferred stock
A Units in RMH. Rockdale is the wholly owned subsidiary of RMH. The current Debtors organizational structure is as follows:

About debtors

According to the debtors: “Rockdale Marcellus, LLC was formed with the acquisition of the Shell-operated Marcellus properties in Tioga, Lycoming and Bradford counties in Pennsylvania in 2017. Rockdale Marcellus owns and operates producing wells on a contiguous acreage of ‘approximately 48,000 gross acres with ~100% working interest. Current production is approximately 110mmcfpd as of March 2021, with over 100 future drill locations identified in the highly productive dry gaseous Marcellus shale formation. Our management team brings significant expertise to evaluate and develop shale reservoirs that generate both exceptional value and long-term growth.”

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