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ARTICLE · 18 FEBRUARY 2016

Midstream Contract Acreage Dedications At Risk

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On Tuesday, Judge Shelley Chapman, the Southern District of New York Bankruptcy Judge in the Sabine Oil & Gas chapter 11 cases, noted she was "inclined" to permit the rejection of certain gathering and processing agreements...

United StatesEnergy and Natural Resources
Sarah Link Schultz
Sarah Link Schultz
Philip Dublin
Philip Dublin
Douglas Glass
Douglas Glass
Stephen Davis
Stephen Davis
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John Goodgame
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If you read one thing...

  • On Tuesday, Judge Shelley Chapman, the Southern District of New York Bankruptcy Judge in the Sabine Oil & Gas chapter 11 cases, noted she was "inclined" to permit the rejection of certain gathering and processing agreements involving Texas oil and gas properties.
  • Many midstream companies have taken comfort in acreage dedications being characterized as "covenants running with the land," but these may not stand up in bankruptcy against potential rulings that the agreements are executory contracts subject to rejection.
  • Permitting the rejection of gathering and processing agreements in bankruptcy may materially aid E&P companies in chapter 11 and creditor recoveries, but may not necessarily be a wholesale benefit to E&P companies vis-a-vis their midstream counterparties as there are practical considerations that may allow midstream companies to retain negotiating leverage.

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