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April 6, 2022 – General unsecured creditor Tilden Marcellus, LLC has objected (again) to the Debtors’ Second Amended Combined Plan of Liquidation and Disclosure Statement (the “Combined Document”) [Docket No. 1039] arguing that "the Plan must be modified to provide for appropriate implementation and enforcement of the Disputed Claims Reserve." That reserve fund, to be overseen by a Plan Administrator, has been set up to distribute "Disputed Claims;" with Tilden Marcellus, which historically shared a number of costs with the Debtors (with whom they were not otherwise affiliated), holding "Disputed Claims" in respect of "certain debts of Rockdale" which it believes it paid on behalf of the Debtors while the two businesses were sharing costs.
On September 21, 2021, the Debtors ("Rockdale Marcellus," owners and operators of producing wells formed with the 2017 acquisition of Shell Marcellus properties) filed for Chapter 11 protection noting estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn.
On February 28, 2022, the Debtors filed the Combined Document [Docket No. 893] and on March 1, 2022, the Court issued an order (i) conditionally approving the Combined Document (for solicitation purposes only), (ii), establishing solicitation procedures and (iii) scheduling a Combined Hearing for April 14, 2022.
On February 4, 2022, Tilden Marcellus, LLC, the owner and operator of approximately 38,000 acres within Potter and Tioga Counties Northeastern Pennsylvania, with over 45 wells in production, filed its own separate Chapter 11 petition noting estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $10.0mn and $50.0mn. At filing, Tilden Marcellus described itself as "a sister entity" of Rockdale Marcellus [whatever that is].
Tilden Marcellus Objection
The objection [Docket No. 1039] states, “Tilden submits this Limited Objection out of an abundance of caution and is not seeking to impede the Debtors’ plan confirmation process. Rather, Tilden seeks only to ensure that the Disputed Claims Reserve, as designed, is implemented effectively and to clarify the scope of the Debtor Releases and exculpation provided under the Plan.
As previewed in Tilden’s Preliminary Objection, Tilden and Rockdale share and/or have shared certain employees, management, professionals, vendors, and contract counterparties. This has led certain third-party vendors and professionals of both Tilden and Rockdale to treat the companies as a single business enterprise and has caused Tilden, upon information and belief, to pay certain debts of Rockdale. Based on the above, Tilden submits that it holds various general unsecured claims against the Debtors as well as certain direct claims against third-party professionals and vendors shared by Tilden and Rockdale.
With respect to Tilden’s claims against the Debtors, which are deemed Disputed Claims under the Plan, the Plan provides for a Disputed Claims Reserve containing funds sufficient to cover all Disputed Claims, to the extent Distributions are made to holders of Allowed Claims in Class 7 (General Unsecured Claims) prior to the resolution or estimation of all Disputed Claims. Tilden agrees that the Disputed Claims Reserve is necessary and appropriate.
The process, however, by which the Disputed Claims Reserve is implemented and enforced is lacking. Under the Plan, the Plan Administrator does not have to obtain court approval of the reserve amount prior to making distributions, is not required to provide notice of Distributions or that a reserve has been set aside prior to making distributions, and is prospectively exculpated from complying with the Plan, which renders the protection intended to be afforded by the Disputed Claims Reserve largely ineffective. To ensure the Disputed Claims Reserve achieves what it was designed to achieve, Tilden submits that the Plan must be modified to provide for appropriate implementation and enforcement of the Disputed Claims Reserve by requiring the Plan Administrator to obtain court approval of the reserve amount prior to making Distributions, provide notice of Distributions prior to making Distributions, and be liable for failing to comply with the Plan as it affects the Disputed Claims Reserve.
With respect to Tilden’s claims against third-parties, Tilden is not assured that such claims are unimpacted by the Debtor Releases and exculpation provided for in the Plan. Tilden submits that the Plan should be amended to make clear that such claims do not fall within the scope of those provisions.”
The Tilden Marcellus, LLC Relationship and Earlier Objection
In respect of the Chapter 11 filing of Tilden Marcellus, LLC, the Debtors' Second Amended Combined Document adds, "On February 4, 2022, Tilden filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the Court. Tilden’s chapter 11 case is administered at Case No. 22-20212-GLT (Bankr. W.D. Pa.).
On February 25, 2022, Tilden filed its Reservation of Rights and Limited Objection to Combined Disclosure Statement and Plan of Liquidation of Rockdale Marcellus Holdings, LLC and Rockdale Marcellus, LLC and Related Solicitation Motion [Doc. No. 875], pursuant to which Tilden asserts that before any Distributions are made, there should be a reconciliation of claims between Tilden and the Debtors to ensure no double counting of claims and to assess whether there should be a consolidation of the Debtors’ Estates and Tilden’s bankruptcy estate. Tilden expressed its intention to object to confirmation of the Plan to the extent its aforementioned concerns, among others, are not resolved.
The Debtors and the Committee disagree with Tilden’s assertions. The Debtors and Tilden are separate and distinct legal entities. Tilden is not a parent company, a subsidiary company, or an Affiliate of either of the Debtors. The Debtors and Tilden have separate books and records, separate and distinct assets and liabilities, and separate operations, including separate bank accounts. The Debtors and Tilden have a different board of managers and different ownership.
The only relationship between these entities is that each of Rockdale and Tilden maintain a separate employee leasing agreement with the same company — EOC — pursuant to which EOC leases to each company on a non-exclusive basis certain employees to perform for each company such functions and services as each company reasonably determines. Although EOC is the employer of the leased employees, each of Rockdale and Tilden have separate direction and control over the leased employees with respect to the performance of services on behalf of each company. To the extent that an employee is leased to both Rockdale and Tilden, the respective employee leasing agreements contain a fee sharing mechanism, pursuant to which a portion of the fees attributable to that shared employee is paid by Rockdale and a portion is paid by Tilden.
Accordingly, the Debtors and the Committee believe that there is no legal basis to support the consolidation of the Debtors’ Estates and Tilden’s bankruptcy estate."
On September 21, 2021, Rockdale Marcellus Holdings and one affiliated Debtor (“Rockdale Marcellus” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Western District of Pennsylvania, lead case number 21-22080. At filing, the Debtors, the owners and operators of producing wells formed with the 2017 acquisition of Shell Marcellus properties, noted estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn.
On January 19th, the Debtors closed on a $222.0mn sale of their assets to Repsol Oil & Gas USA, LLC (“Repsol”), see further below, with $21.0mn of asset sale proceeds available for distribution to creditors after otherwise settling prepetition and DIP financing obligations.
The Debtors’ Disclosure Statement motion [Docket No. 816] provides, “The Debtors entered the Chapter 11 Cases in September 2021 with a dual pronged strategy to maximize value for the benefit of their creditors after exploring restructuring alternatives for several months. The Debtors embarked immediately on a process to market and sell substantially all of their assets pursuant to section 363 of the Bankruptcy Code, while at the same time seeking an injection of substantial capital from a plan sponsor for the purpose of funding a chapter 11 reorganization plan. After a mere four months, the Debtors capitalized on the first of these options by selling substantially all of their assets to Repsol Oil & Gas USA, LLC (‘Repsol’) for an aggregate purchase price of $222 million, plus the assumption of approximately $1.9 million of trade payables (the ‘Sale’). The Sale to Repsol closed on January 19, 2022. Immediately following the Sale, and with the Court’s approval, the Debtors used the sale proceeds to satisfy or settle all of the Debtors’ secured obligations under their debtor-in-possession credit facility, their prepetition revolving credit facility, and their prepetition second lien credit facility, and to pay in full the secured claims against the Debtors relating to three terminated hedge agreements. As a result of the Sale and the payoff of the Debtors’ secured indebtedness, the Debtors have approximately $21 million in cash and other miscellaneous assets remaining to wind down the Debtors’ estates and to make distributions to the holders of allowed claims.
With the goals of minimizing administrative expenses and making maximum distributions to holders of allowed claims as quickly as possible, the Debtors propose proceeding toward confirmation with the Combined Plan and Disclosure Statement, as opposed to filing a separate plan and a disclosure statement, and seek this Court’s approval of a combined hearing to consider simultaneously (i) approval of the adequacy of the Combined Plan and Disclosure Statement under section 1125 of the Bankruptcy Code and (ii) confirmation of the Combined Plan and Disclosure Statement under section 1129 of the Bankruptcy Code. To further expedite the path towards confirmation and to minimize administrative expenses, the Debtors request that the Court schedule a hearing to consider the relief requested in the Motion on an expedited basis. By employing these procedures, the Debtors believe it is possible to obtain confirmation of their chapter 11 plan in mid-April 2022, with an effective date occurring and initial distributions to be made shortly thereafter.
Since filing an earlier version of the Combined Plan and Disclosure Statement on February 1, 2022, the Debtors have engaged in constructive dialogue with the Committee and two of the Debtors’ largest unsecured creditors—Regency Marcellus Gas Gathering, LLC (‘Regency’) and Aqua-ETC Water Solutions, LLC (‘Aqua’)—regarding the terms of an amended chapter 11 plan and the parameters of administrative expense claims and wind down budgets that provide the Debtors the most efficient and effective means to exit the Chapter 11 Cases and deliver value to holders of allowed claims as quickly as possible. The Debtors are pleased to report that the parties’ dialogue has resulted in the filing of an amended chapter 11 plan… that is supported by the Committee, Regency and Aqua.”
On December 29, 2021, further to the Court’s October 21st bidding procedures order [Docket No. 297] and an auction held on December 16th, the Court hearing the Rockdale Marcellus cases approved the sale of Debtors’ properties located in Bradford, Tioga, and Lycoming Counties, Pennsylvania and certain related assets to Repsol Oil & Gas USA, LLC (the “Purchaser”) [Docket No. 617]. The asset purchase agreement (the “APA”) governing the terms of the sale is attached to the order as Exhibit 1.
The Purchaser, a U.S. subsidiary of Spanish energy giant Repsol, has exploration and production assets in the Gulf of Mexico, the Marcellus Shale in Pennsylvania, the Eagle Ford Shale in South Texas, the North Slope in Alaska and the Trenton-Black River in New York.
Prepetition Corporate Structure
The Debtors are organized as limited liability companies under Title 3 of the Texas Business Organizations Code. RMH is owned by a group of individual and institutional investors, including members the Debtors’ senior management team, who own common units indirectly in Rockdale through an aggregator entity known as Rockdale Holdings, LLC. Tsunami Marcellus Partners, LP is the single largest equity holder in RMH, owning more than 85% of the Preferred
A Units in RMH. Rockdale is the wholly-owned subsidiary of RMH. The Debtors’ current organizational structure is as follows:
About the Debtors
According to the Debtors: “Rockdale Marcellus, LLC was formed with the acquisition of Shell’s operated Marcellus properties in Tioga, Lycoming and Bradford Counties in Pennsylvania in 2017. Rockdale Marcellus owns and operates producing wells on a contiguous acreage position of ~48k gross acres with ~100% working interest. Current production is ~110 mmcfpd as of March 2021, with over 100 future drilling locations identified in the highly productive Marcellus dry gas shale formation. Our management team brings significant expertise to evaluate and develop shale reservoirs generating both exceptional value and long term growth."
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