EXCO Resources units, affiliates settle interest acquisition dispute

By Caroline Salls

Pittsburgh, Jan. 29 – Three EXCO Resources, Inc. debtors and two of their non-debtor affiliates requested court approval of a settlement that will result in the ending of an area of mutual interest (AMI) agreement related to the sharing of oil and gas interests in the Appalachian region, according to a motion filed with the U.S. Bankruptcy Court for the Southern District of Texas.

EXCO said the debtors and affiliates entered into a joint venture in June 2010 with BG US Production Co., LLC in connection with assets in the Appalachia region.

The parties entered a joint development agreement in connection with the joint venture. Under the JDA, BG and the EXCO debtors agreed to offer to other unaffiliated parties a collective 50% of the interest acquired in any oil and gas interests, including leases, in the AMI.

In February 2016, Royal Dutch Shell plc acquired BG’s ultimate parent company, causing it to become the ultimate parent of BG. However, following the acquisition, EXCO said its debtors became aware that leases were being acquired within the AMI without an interest being offered to the debtors.

According to the motion, the parties agreed to enter into the settlement to mutually terminate the AMI provision and to fully resolve related disputes.

EXCO said the settlement will double the debtors’ and their affiliates’ acreage position in the Appalachia region, double their production in the region and eliminate the complex joint venture structure and AMI restrictions, “which will increase the marketability of the debtors’ and their affiliates’ assets in that region.”

Under the proposed settlement, BG will transfer to the debtors its 100% membership interest in each of BG Production Co, (PA), LLC and BG Production Co. (WV), LLC and its 50% membership interest in two other entities.

The joint venture agreement for the Appalachia region will be terminated.

The debtors will acquire Shell’s $7.2 million share of the working capital of EXCO Resources (PA), LLC, and will waive accounts receivables in the amount of $2.57 million.

A hearing is scheduled for Feb. 22.

EXCO is a Dallas-based oil and gas exploration and production company operating in Texas, North Louisiana and Appalachia. The company filed for bankruptcy on Jan. 15 under Chapter 11 case number 18-30155.

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