Southland Royalty disclosure statement approved; plan hearing May 12

By Sarah Lizee

Olympia, Wash., March 23 – Southland Royalty Co. LLC received approval of the disclosure statement for its Chapter 11 plan, according to an order filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

The plan confirmation hearing is scheduled for May 12.

The plan provides for the debtor to sell substantially all of its assets to Wamsutter E&P, LLC in exchange for about $251.7 million, comprised of a cash purchase price of roughly $148 million, assumption by the purchaser of certain liabilities associated with plugging and abandonment with an estimated PV-10 value of about $102.4 million, and payment of any third-party cure costs for those agreements the purchaser elects to have assumed and assigned to it, anticipated to be $1.3 million.

About $48 million of the cash purchase price will be applied to pay cure costs arising from the assumption of midstream agreements with affiliates of the purchaser.

The net cash proceeds of the sale transaction will be used to fund distributions under the plan.

The plan contemplates the final resolution of all pre- and post-petition funded debt of Southland Royalty, and full payment to holders of general administrative claims, priority tax claims, debtor-in-possession facility claims, professional fee claims, other priority claims and other secured claims.

The plan also provides for a payment to holders of pre-petition RBL secured claims in cash of the “net distributable proceeds, which represents all cash and other assets of the debtor available at any time on or after the effective date, including cash on hand and net proceeds from the sale transaction, other than amounts allocated under the plan for other creditors or other purposes.

Holders of general unsecured claims will receive a distribution of the GUC guaranteed distribution amount, 16% of the Sage Grouse lease proceeds, and 100% of proceeds of retained causes of action.

An RBL plan settlement will be implemented, under which holders of pre-petition RBL claims agree to waive claims resulting from the diminution in value of collateral, and subordinate the pre-petition RBL deficiency claim to the GUC guaranteed distribution amount and GUC Sage Grouse proceeds in order to resolve and settle any and all challenges to the pre-petition RBL claims and related liens.

A liquidating trust will hold and liquidate certain assets for the benefit of creditors, and a plan administrator will wind down the debtor’s business and affairs, among other things.

Interests will be canceled without any distribution.

Fort Worth-based Southland is an upstream energy company. The company filed bankruptcy on Jan. 27, 2020 under Chapter 11 case number 20-10158.

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