November 13, 2020 – The Debtors notified the Court that their Third Amended Chapter 11 Plan of Reorganization had become effective as of November 12, 2020 [Docket No.210]. The Court had previously confirmed the Debtors’ Plan on October 21, 2020 [Docket No. 194]. It appears that the surviving part of the Debtors' business, Remora Operating, LLC, the new equity of which will be held by the Debtors' prepetition first lien lenders, has been renamed "Riverbank Operating."

On August 12, 2020, privately-held Remora Petroleum, L.P. and four affiliated Debtors (“Remora” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 20-34037 (Judge Jones). At filing, the Debtors, Texas-based owners of operated and non-operated working interests across the Anadarko, Gulf Coast, Permian, D-J and Los Angeles Basins, noted estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $50.0mn and $100.0mn.

The Debtors’ were represented by Timothy A. Davidson of Hunton Andrews Kurth LLP. and further board-authorized engagements included (i) Conway MacKenzie Management Services, LLC as financial advisors (and to provide a chief restructuring officer), (ii) Seaport Gordian Energy, LLC as investment banker and (iii) Donlin, Recano & Company, Inc. as claims agent.

The deadline for filing Administrative Expense Claims and Contract Rejection Claims is set no later than thirty (30) days after the Effective Date, i.e., by December 14, 2020.

Plan Overview

The Debtors' memorandum of law in support of Plan confirmation sums up: "Less than two and a half months after commencing these chapter 11 cases (the ‘Chapter 11 Cases’), the Debtors seek confirmation of a plan of reorganization that would, among other things, provide (i) $600,000 for payment to the Second Lien Lenders in full satisfaction of their claims; (ii) $100,000 for payment of unsecured creditors pro rata in full satisfaction of their claims; (iii) transfer all assets of the Debtors to Remora Operating, LLC (‘Remora Operating’) and assignment of the equity interests in Remora Operating to the First Lien Lenders or their designee in satisfaction of amounts owed under the Prepetition First Lien Credit Agreement (as defined below) and the DIP Claim; and (iv) waiver of the any deficiency claim owed to the First Lien Lenders. Further, the Debtors other than Remora Operating will wind down their operations post confirmation. The transactions enumerated above will allow the Debtors to emerge from these Chapter 11 Cases as a reorganized entity better positioned to withstand the commodity price volatility of the oil and gas industry."

The Disclosure Statement [Docket No. 132] provides: “The Debtors are commencing this Solicitation after extensive discussions over the past several months with certain of their key creditor constituencies, including the holders of the Debtors’ first lien indebtedness. The Plan is the result of these extensive good faith discussions and encompasses a comprehensive restructuring of the Debtors’ existing debt obligations in these Chapter 11 Cases (the ‘Restructuring’).

The Restructuring proposed by the Debtors will provide substantial benefits to the Debtors and their stakeholders, including, without limitation, the following:

• Except as otherwise provided in the Plan, all assets of the Debtors, including the Properties, will be transferred to Remora Operating prior to and as a condition to the Effective Date. The Restructuring will transfer the equity interests in Remora Operating, LLC in satisfaction of the Allowed First Lien Lender Secured Claims and/or DIP Claims. After the Effective Date, holders of the Allowed First Lien Lender Secured Claims will own 100% of the equity interests in Reorganized Remora Operating, LLC (subject to dilution by the Management Incentive Plan and the distribution to the Holders of DIP Claims to the extent the DIP Agent, acting at the direction of the DIP Required Lenders, elects to satisfy the DIP Claims with New Equity Interests of Reorganized Remora Operating).
• The continuation of Reorganized Remora Operating’s business, including the ability to participate in future exploration activities, will provide benefit by way of: maintaining contractual relationships among working interest owners; continued participation by Reorganized Remora Operating in funding its portion of operating and development costs for drilling, exploration, and production operations; and continued compliance with decommissioning and plugging and abandonment obligations. It is anticipated that certain of the Debtors’ management team and employees may continue to operate the assets for Reorganized Remora Operating through a yet to be determined structure or potential transition services agreement, as may be negotiated with and determined by the New Board.
• Reorganized Remora, Reorganized Remora GP, Reorganized Remora CA and Reorganized Remora LA shall continue in existence after the Effective Date in order to wind down their affairs.
• The Restructuring will also provide the basis for moving forward for Reorganized Remora Operating to continue to do business with many current vendors and suppliers, thereby providing economic contribution to the vendor and supplier community.
• The Restructuring will provide (through the use of collateral securing the DIP Claims and the First Lien Lender Secured Claims) recovery to certain Classes of Claims that could expect a lesser recovery, or no recovery, if the Debtors were liquidated under chapter 7 of the Bankruptcy Code or if the Holders of the First Lien Lender Secured Claims were to exercise foreclosure rights. Absent the consent of the First Lien Lenders, the Class 2 Cash Distribution and the Class 3 Cash Distribution would otherwise not be available to Holders of Allowed Second Lien Claims and Allowed General Unsecured Claims, respectively.”

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement; see also the Liquidation Analysis below)

• Class 1 (“First Lien Lender Secured Claims”) is impaired and entitled to vote on the Plan. First Lien Lender Secured Claims will be allowed as Secured Claims in the amount no less than $16.8mn against each of the Debtors. On the Effective Date, each holder will receive directly or indirectly its respective Pro Rata share of 100% of the New Equity Interests in Reorganized Remora Operating (subject to dilution by the Management Incentive Plan and the distribution to the Holders of DIP Claims to the extent the DIP Agent, acting at the direction of the DIP Required Lenders, elects to satisfy the DIP Claims with New Equity Interests of Reorganized Remora Operating).
• Class 2 (“Second Lien Claims”) is impaired and entitled to vote on the Plan. Each holder will receive its Pro Rata Share of the Class 2 Cash Distribution ($600k) on the Effective Date.
• Class 3 (“Unsecured Claims”) is impaired and entitled to vote on the Plan. Each holder will receive its Pro Rata Share of the Class 3 Cash Distribution ($100k) on the Effective Date. Class 3 includes the Debtors’ $10.0mn CARES Act loan.
• Class 4 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Each Allowed Intercompany Claim shall be cancelled and released without any Plan Distribution on account of such Claim.
• Class 5 (“Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. All Equity Interests in Remora Operating shall automatically be deemed cancelled, and the Holders of such Equity Interests shall not receive any Plan Distribution.

Voting Results

On October 20, 2020, the Debtors' claims agent notified the Court of the Plan voting results [Docket No. 185], which were as follows:

• Class 1 (“First Lien Lender Secured Claims”): 2 claim holders, representing $16,800,000.00 (100%) in amount and 100% in number, voted in favor of the Plan.
• Class 2 (“Second Lien Claims”): 1 claim holder, representing $27,989,911.00 (100%) in amount and 100% in number, voted in favor of the Plan.
• Class 3 (“Unsecured Claims”): 105 claim holders, representing $19,369,995.95 (>99.99%) in amount and 92.92% in number, voted in favor of the Plan. 8 claims holders, representing $9 (<00.01%) in amount and 7.08% in number, rejected the Plan.

Prepetition Indebtedness

As of the Petition date, the Debtors’ debt obligations consisted of: (a) borrowings of approximately $36.1mn in principal amount under their First Lien Loan Agreement and (b) borrowings of approximately $26.6mn in principal amount under their Second Lien Loan Agreement.

Events Leading to the Chapter 11 Filings

Commodity price pressure from 2014, Russia/Saudi dispute, COVID-19, breached financial covenants, borrowing base reduction and defaults. A familiar story.

The Disclosure Statement provides: "Beginning in November 2014, commodity prices, particularly for crude oil, began to decline sharply and continued to decline into 2016. Although commodity prices partially recovered in late 2016 and continued to slowly recover in 2017, commodity prices have not fully recovered from their previous highs and remain volatile. These issues were exacerbated in March and April 2020 by the sharp decline in commodity prices caused by (i) a demand shock as a result of ongoing efforts to contain the outbreak and spread of the COVID-19 virus; and (ii) a dispute between Russia and the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, regarding reductions to crude oil productions levels. 

The sustained decline and depressed commodity prices made it difficult for the Debtors to access additional liquidity to continue its growth strategy and maintain operations. Resulting from this prolonged decline in commodity prices, the Debtors were unable to comply with certain financial covenants in the First Lien Loan Agreement and Second Lien Loan Agreement for the fiscal quarters ending June 30, 2019 and September 30, 2019. Additionally, on December 12, 2019, the First Lien Agent informed Remora of the existence of a Borrowing Base Deficiency (as defined in the First Lien Loan Agreement) in the amount $3.25 million (the ‘Fall 2019 Borrowing Base Deficiency’). 

In response, the Debtors exercised their rights under the First Lien Loan Agreement to repay the Fall 2019 Borrowing Base Deficiency in five equal monthly installments, with the first such monthly installment due and payable on January 13, 2020. The Debtors were unable to make the first installment payment and, as a result, the First Lien Agent delivered to the Debtors a notice of default and reservation of rights letter on January 14, 2020 (the ‘First Lien Agent’s Notice of Default’). Additionally, on May 27, 2020, the First Lien Loan Agreement matured. On May 28, 2020, the First Lien Agent delivered to the Debtors the notice of maturity and events of default, demand for payment, reaffirmation of default rate, and reservation of rights and remedies (the ‘Notice of Maturity’). Further, on May 11, 2020, the Second Lien Agent sent a Notice of Default and Reservation of Rights Letter to Remora (the ‘Second Lien Agent’s Notice of Default’ and together with the First Lien Agent’s Notice of Default and the Notice of Maturity, the ‘Default Notices’) identifying certain events of default under the Second Lien Loan Agreement, including: (i) payment default as a result of failure to pay unpaid interest that accrued prior to April 30, 2020; (ii) failure to comply with certain financial covenants under the Second Lien Loan Agreement; and (iii) failure to deliver certain financial reporting. As of the Petition Date, the Debtors have not cured the events of default set forth in the Default Notices."

Key Documents

The following documents were attached to the Disclosure Statement [Docket No. 132]

• Exhibit A: Plan 
• Exhibit B: Financial Projections 
• Exhibit C: Liquidation Analysis 
• Exhibit D: Valuation Analysis 
• Exhibit E: Disclosure Statement Order with Exhibits

On October 9, 2020, the Debtors filed an Initial Plan Supplement to their Chapter 11 Plan of Reorganization [Docket No. 169] were as follows:

• Exhibit A: Management of Reorganized Remora Operating and Wind Down Representative Disclosure
• Exhibit B: Schedule of Assumed Executory Contracts and Unexpired Leases
• Exhibit C: Schedule of Rejected Executory Contracts and Unexpired Leases
• Exhibit D: Retained Causes of Action
• Exhibit E: Amended and Restated Operating Agreement for Reorganized Remora Operating
• Exhibit F: Form Assignment and Assumption Agreement of Debtors’ Assets to Remora Operating

On October 16, 2020, the Debtors filed a Plan Supplement to their Chapter 11 Plan of Reorganization [Docket No.181] and attached:

• Exhibit B: Revised Schedule of Assumed Executory Contracts and Unexpired Leases
• Exhibit C: Revised Schedule of Rejected Executory Contracts and Unexpired Leases

Liquidation Analysis (see Exhibit C to Disclosure Statement for notes)

About the Debtors

According to the Debtors: "Remora Petroleum is a private oil and gas company focused on the acquisition and development of mature, long-lived producing properties. The Company owns operated and non-operated working interests across the Anadarko, Gulf Coast, Permian, D-J and Los Angeles Basins."

As of the Petition date, the Debtors held non-operated working interests in (i) 298 wells in the Anadarko Basin centered in West Oklahoma and the Texas Panhandle; (ii) 56 wells in the Gulf Coast Basin of South and East Texas, Louisiana, and Alabama; (iii) 5 wells in the Denver-Julesburg Basin of Eastern Colorado and Southeastern Wyoming; (iv) 852 wells in the Arkoma Basin of Southeastern Oklahoma and Arkansas; (v) 1 well in the Delaware Basin of West Texas and Southern New Mexico; and (vi) 96 wells in the Texas-Louisiana Salt Basin. From their non-operated assets, for the three months ended June 30, 2020, the Debtors produced approximately 3,001 barrels of oil equivalent per day (net), made up of 7% oil, 13% NGLs and 80% natural gas. This production accounted for approximately $850,000 in monthly revenue over the same period of time.

Corporate Structure

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