Case Document 166 Filed in TXSB on 07/05/16 Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

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1 Case Document 166 Filed in TXSB on 07/05/16 Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS In re: ) Chapter 11 ) LINC USA GP, et al. 1 ) Case No (DRJ) ) Debtors. ) (Jointly Administered) DEBTORS EXPEDITED MOTION FOR ORDER REGARDING RELEASE OF BOND Linc USA GP, et al., the above-captioned debtors and debtors in possession (together, the Debtors ), hereby move for entry of an order, substantially in the form filed herewith, authorizing and directing RLI Insurance Company ( RLI ) to release the Debtors cash securing the BP Bond (as defined herein). In support of this Motion, the Debtors respectfully represent as follows: I. JURISDICTION & VENUE 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). Venue in this Court is proper pursuant to 28 U.S.C II. RELEVANT BACKGROUND 2. Together, the Debtors operate an oil and gas exploration and production business with a primary focus on the Texas Gulf Coast. Each of the Debtors is a direct or indirect subsidiary of Linc USA GP. Each of the Debtors is based in Houston, Texas. The Debtors properties are operated by Debtor Linc Energy Operations, Inc. ( LEO ). 1 The Debtors in these chapter cases, along with the last four digits of each Debtors federal tax identification number, are: Linc Energy Finance (USA), Inc. (6684); Linc USA GP (5234); Linc Energy Resources, Inc. (9613); Linc Gulf Coast Petroleum, Inc. (6790); Linc Energy Petroleum (Louisiana), LLC (1074); Linc Alaska Resources, LLC (2362); Paen Insula Holdings, LLC (1681); Linc Energy Petroleum (Wyoming), Inc. (9859); Diasu Holdings, LLC (9626); Diasu Oil & Gas Company, Inc. (8926); and Linc Energy Operations, Inc. (5806). #

2 Case Document 166 Filed in TXSB on 07/05/16 Page 2 of 5 3. On May 29, 2016 (the Petition Date ), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. 4. A full description of the Debtors' business, corporate structure, prepetition indebtedness, and events leading to these chapter 11 cases is set forth in the Declaration of Jude Rolfes in Support of Chapter 11 Petitions and First Day Pleadings, (the First Day Declaration ) [Dkt. No. 14], filed on the Petition Date and incorporated herein by reference. 5. The Debtors are operating their business and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 6. Prior to March 31, 2016, Debtor Diasu Holdings, LLC ( Diasu Holdings ) was the owner of right, title and interest in and to certain oil, gas and mineral leases located in Black Bayou Field, Cameron Parish, Louisiana (such Declaration of Lease recorded at File No ) (the Louisiana Leases ), which were operated by Diasu Holding s subsidiary, Diasu Oil & Gas Company, Inc. ( Diasu ). 7. In order to secure its abandonment and clean-up operations related to the Louisiana Leases, Diasu obtained that certain Performance Bond No. RLB , dated March 30, 2004, by and between Diasu as Principal, RLI as Surety, and Amoco Production Company as Obligee, in the sum of $1,500,000 (the BP Bond ), attached hereto as Exhibit A. 8. The BP Bond was secured by LEO in the cash amount of $1,500,000 (the Collateral ), pursuant to that certain Collateral and Receipt Agreement dated April 25, 2013, by and between Diasu as Principal, LEO as Pledgor and RLI as Surety, attached hereto as Exhibit B (the Collateral Agreement ). 9. The executed Collateral Agreement provides, as follows: UPON RECEIPT OF EVIDENCE SATISFACTORY TO SURETY OF ITS DISCHARGE FROM ALL LIABILITY UNDER SUCH BONDS, AND 2 #

3 Case Document 166 Filed in TXSB on 07/05/16 Page 3 of 5 OWNERSHIP OF THE COLLATERAL SECURITY BY PLEDGOR (IT BEING RECOGNIZED THAT SURETY MUST BE GIVEN REASONABLE LATITUDE IN THE DETERMINATION OF WHAT EVIDENCE IS SATISFACTORY WITH REGARD TO PROOF OF OWNERSHIP AND OF TERMINATION OF LIABILITY) AND OF PAYMENTS OF ALL AMOUNTS DUE AS PROVIDED HEREIN, SURETY SHALL, WITHIN A REASONABLE TIME, RETURN SAID COLLATERAL SECURITY, LESS ANY DEDUCTIONS PURSUANT TO THE TERMS OF THIS AGREEMENT, TO THE PLEDGOR. 10. An Indemnity Agreement dated April 24, 2013 was also entered into by Diasu and LEO and is attached hereto as Exhibit C. The Indemnity Agreement provides for the treatment of certain costs and expenses of Surety relating to the BP Bond. On March 31, 2016, Diasu Holdings sold its right, title and interest in and to the Louisiana Leases to RE1, LLC ( RE1 ), pursuant to that certain Purchase and Sale Agreement, dated March 31, 2016, by and between Diasu Holdings, as seller, and RE1, as buyer (the PSA ). 11. Pursuant to the PSA, all rights of LEO under the BP Bond, including the security therefor, were excluded from the properties purchased by RE1 and were reserved to Diasu Holdings. Additionally, the PSA required RE1 to replace LEO under the BP Bond and post security in the amount of and covering the same obligations as stated in the BP Bond. 12. On March 28, 2016, RE1 secured that certain Performance Bond No. PB , by and between Robertson Energy, LLC as Principal, Philadelphia Indemnity Insurance Company as Surety, and BP America Production Company ( BP ), as Obligee, attached hereto as Exhibit D, which replaced and superseded the BP Bond. 13. On June 21, 2016, BP issued a signed statement, attached hereto as Exhibit E, acknowledging that the BP Bond had been released of all past, present and future liability and, accordingly, RLI could close its file with respect to the BP Bond with no residual liability effective March 31, #

4 Case Document 166 Filed in TXSB on 07/05/16 Page 4 of The Debtors have made several requests to RLI for the Collateral, and have informed RLI that it is required to release the Collateral to LEO pursuant to 11 U.S.C RLI has indicated its willingness to release the Collateral and requested that, in light of the bankruptcy proceedings, the Debtors obtain court authority for the proper payee and clarifying that, upon release of the Collateral to LEO, RLI will have no further liability to the Debtors with respect to the Collateral or the BP Bond. III. RELIEF REQUESTED 16. The Debtors request entry of an order, substantially in the form filed herewith, (i) finding that LEO is entitled to the Collateral; (ii) ordering RLI to release the Collateral to LEO; and (iii) finding that RLI has no liability to the Debtors related to the release of the Collateral or the BP Bond. 17. Expedited relief is appropriate as the Debtors have an immediate need for the Collateral in order to operate these estates for the interests of their creditors. 18. The Debtors request that the proposed order, filed herewith, be entered without a hearing, however, should the Court require that a hearing be held, the Debtors request that the hearing be held on July 18, 2016 at 1:00 p.m. [Remainder of page intentionally left blank] #

5 Case Document 166 Filed in TXSB on 07/05/16 Page 5 of 5 IV. PRAYER WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form filed herewith, granting the relief requested in this Motion, and such other and further relief as is just and proper. Respectfully Submitted, BRACEWELL LLP By: /s/ Jason G. Cohen Jason G. Cohen Texas Bar No Jason.Cohen@bracewelllaw.com William A. (Trey) Wood III Texas Bar No Trey.Wood@bracewelllaw.com Chelsea R. Dal Corso Texas Bar No Chelsea.DalCorso@bracewelllaw.com 711 Louisiana, Suite 2300 Houston, Texas Telephone: (713) Facsimile: (713) PROPOSED COUNSEL FOR THE DEBTORS AND DEBTORS IN POSSESSION #

6 Case Document Filed in TXSB on 07/05/16 Page 1 of 7 Exhibit A

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13 Case Document Filed in TXSB on 07/05/16 Page 1 of 4 Exhibit B

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17 Case Document Filed in TXSB on 07/05/16 Page 1 of 10 Exhibit C

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27 Case Document Filed in TXSB on 07/05/16 Page 1 of 7 Exhibit D

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35 Case Document Filed in TXSB on 07/05/16 Page 1 of 3 Proposed Order #

36 Case Document Filed in TXSB on 07/05/16 Page 2 of 3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS In re: ) Chapter 11 ) LINC USA GP, et al. 1 ) Case No (DRJ) ) Debtors. ) (Jointly Administered) ORDER TO RELEASE COLLATERAL Upon consideration of the Debtors Expedited Motion Regarding Release of Bond (the Motion ), 2 filed by the Debtors, and it appearing to the Court that notice was sufficient under the circumstances and that the relief sought should be granted, IT IS HEREBY ORDERED THAT: 1. RLI is directed to promptly release (and within a maximum of ten business days of entry of this Order) the Collateral to LEO, less $5, relating to certain costs and expenses deductible under the Indemnity Agreement, for a total of $1,495, by wire transfer to the following account: Company: Linc Energy Operations, Inc. Bank: Frost Bank Routing No.: Account No.: RLI shall have no liability to any of the Debtors related to the release of the Collateral to LEO. 3. RLI shall have no liability to any of the Debtors related to the BP Bond. 1 The Debtors in these chapter cases, along with the last four digits of each Debtors federal tax identification number, are: Linc Energy Finance (USA), Inc. (6684); Linc USA GP (5234); Linc Energy Resources, Inc. (9613); Linc Gulf Coast Petroleum, Inc. (6790); Linc Energy Petroleum (Louisiana), LLC (1074); Linc Alaska Resources, LLC (2362); Paen Insula Holdings, LLC (1681); Linc Energy Petroleum (Wyoming), Inc. (9859); Diasu Holdings, LLC (9626); Diasu Oil & Gas Company, Inc. (8926); and Linc Energy Operations, Inc. (5806). 2 Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the Motion. #

37 Case Document Filed in TXSB on 07/05/16 Page 3 of 3 4. The terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 5. This Court shall retain jurisdiction with respect to all matters arising from or related to the implementation or interpretation of this Order. Dated: DAVID R. JONES UNITED STATES BANKRUPTCY JUDGE #