American Eagle Energy cash collateral use order reconsideration denied

By Caroline Salls

Pittsburgh, Dec. 2 – American Eagle Energy Corp. oil and gas producing property co-owner USG Properties Bakken I, LLC’s motion for reconsideration of an order authorizing the company to use cash collateral was denied Wednesday by the U.S. Bankruptcy Court for the District of Colorado.

As previously reported, USG said American Eagle’s cash collateral use motion was based on a claim that its estate was administratively solvent and that it would timely pay post bankruptcy administrative claims in full, including those arising in the ordinary course of business.

“There is now emerging doubt, and a lack of assurances, that the foundational premise for the second final order authorizing use of cash collateral remains true,” USG said in the motion.

“Doubt now exists on whether [American Eagle’s] continued operations in Chapter 11 can continue to allow for payment in full of all post-petition obligations.”

While noteholders “continue to reap payments of whatever amounts the professionals to the noteholders and indenture trustee tender to the debtors,” USG said the company’s cash position is eroding and now at the point, given the recent revelation of the defaults in payment on account of sold production, that current obligations may not be satisfied.

In Wednesday’s order, judge Howard R. Tallman said “USG makes scant effort to argue the existence of any legal justification for reconsideration of the [cash collateral order].”

Tallman said USG did not object to American Eagle’s second cash collateral motion, so the reconsideration motion must be denied.

In addition, the judge said USG owns its share of hydrocarbons produced under a joint operating agreement with the American Eagle debtors, and it is only subject to the debtors’ sale arrangements with Power Energy Partners, LP “to the extent it chooses to allow the debtors to market its share of production along with their own.”

Tallman said USG complained that the debtors’ cash collateral budget assumes payment for hydrocarbon production from Power Energy Partners, but that it is now apparent that Power Energy is in default of its obligations.

However, the judge said American Eagle already knew that when the cash collateral motion was heard by the court because it filed a lawsuit against Power Energy for nonpayment of amounts due for September and October production before the hearing.

American Eagle is a Littleton, Colo.-based independent oil and gas acquisition, exploration and development company. The company filed for bankruptcy on May 8, 2015 under Chapter 11 case number 15-15073.

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