The $320 million purchase of upstream oil and gas assets of Alta Mesa Holdings,LP and its subsidiaries by an Oklahoma City company has encountered a hold up and a federal bankruptcy judge wants to know why. Apparently funding for the deal fell through this month.
A hearing has been ordered for Thursday in South Texas after the purchase of Alta Mesa Holdings by Oklahoma City-based BCE-Mach III LLC, the third partnership between Bayou City Management LLC and Mach Resources LLC hasn’t been completed as promised. The purchase included the midstream assets of Kingfisher Midstream LLC as part of the sellers’ Chapter 11 bankruptcy.
Under the purchase agreement, closing was to have been made by Feb. 12, 2020 but BCE-Mach III LLC asked to move the date to Feb. 28. However, the closing has yet to be finalized and resulted in Thursday’s court hearing in Houston.
BCE-Mach III’s purchase involved more than 900 operated wells and 130,000 net acres as well as 453 miles of gas gathering pipeline, 224 miles of water disposal pipeline, 108 miles of oil gathering pipeline and 50,000 barrels of oil storage.
At the time of the announced deal, Tom L. Ward, CEO of Mach Resources said, ““This was a unique opportunity to acquire a sizeable cash-flowing asset with the supporting midstream infrastructure, through a bankruptcy process, in an area of our team’s expertise and still have an extensive inventory for future development.”
He explained the partnership had a strategic aim of consolidating and maximizing underdeveloped and undercapitalized distressed areas in the Mid-Continent.
The purchase of Alta Mesa Holdings was the sixth acquisition by the partnerships between BCE and Mach. But it was also the first by the newly-formed BCE-Mach III LLC.
But something happened, resulting in an emergency relief being requested in bankruptcy court by Wells Fargo Bank, N.A. in its capacity as Administrative Agent in the case.
Among the debtors listed in the Chapter 11 case were Oklahoma Energy Acquisitions, LP; Kingfisher Midstream LLC; Kingfisher STACK Oil Pipeline, LLC; Oklahoma Produced Water Solutions, LLC; and Cimarron Express Pipeline, LCC which was created to serve Oklahoma’s STACK play.
Wells Fargo, in filing the motion for the emergency hearing stated, “This Court indicated during the sale process that if the Buyer is “not going to be ready to close, I need to understand why.””
The bank took note the closing was already delayed once until Feb. 28, 2020.
” In reality, the Buyer did not intend to close on February 28, 2020, as agreed, because it was looking for a cheaper source of funding as opposed to closing on its “backstop” agreement with UBS.”
The bank contends that as of March 2, 2020, counsel for BCE admitted the firm had been working with a syndicate of potential lenders and as of March 1, the potential syndicate “fell apartment” and the other alternative source of funding “backed away.”
Wells Faro contends the estates have already lost hundreds of thousands of dollars because of the delay in the closing date and they will continue to suffer if the closing is pushed back again.
The apparent collapse of financing for BCE raises a big question—if it had difficulty in obtaining bank money in the first place, how will the lack of funds be affected with the drop in oil prices?
Source: Court documents