Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 1 of 9 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: INTERVENTION ENERGY HOLDINGS, LLC., et al., Debtors. 1 Chapter 11 Case No. 16-11247 (KJC) (Jointly Administered) INTERVENTION ENERGY, LLC Adversary Proceeding No. Plaintiff, v. STATOIL OIL AND GAS LP Defendant. COMPLAINT FOR TURNOVER AND VIOLATION OF THE AUTOMATIC STAY Intervention Energy, LLC, a debtor in the above-captioned chapter 11 case (the Debtor or Plaintiff ), through its undersigned proposed counsel, hereby files this Complaint for Turnover and Violation of the Automatic Stay against defendant, Statoil Oil and Gas LP ( Statoil or Defendant ), and in support thereof alleges as follows: JURISDICTION AND VENUE 1. This is an adversary proceeding brought by Plaintiff for turnover under section 542 and violation of the automatic stay under section 362 of title 11 of the United States Code (the Bankruptcy Code ). 1 The Debtors in these Chapter 11 cases, together with the last four digits of each Debtor s federal tax identification number, are as follows: Intervention Energy Holdings, LLC (8131); and Intervention Energy, LLC (8131). The mailing address for the Debtors, solely for purposes of notices and communications, is: 475 17th Street, Suite 1040, Denver, CO 80202. EAST\126325559.2
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 2 of 9 2. This Court has subject matter jurisdiction over this adversary proceeding, pursuant to 28 U.S.C. 157 and 1334(b) and the Amended Standing Order of Reference for the United States District of Delaware, dated February 29, 2012. 3. This adversary proceeding is a core proceeding pursuant to 28 U.S.C. 157(b)(1) and (2) and this Court may enter a final order consistent with these statutes and Article III of the United States Constitution. 4. Venue is proper in the Bankruptcy Court for the District of Delaware (the Court ), pursuant to 28 U.S.C. 1409. 5. In accordance with Rule 7008-1 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, the Plaintiff hereby states that it consents to the entry of final orders or judgments by this Court if it is determined that the Court, absent the consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. PARTIES AND GENERAL BACKGROUND 6. The Debtor is a limited liability company organized and existing under the laws of Delaware. The Debtor mailing address solely for purposes of notices and communications is 475 17th Street, Suite 1040, Denver, CO 80202. Debtor is one of the largest private, nonoperated oil and natural gas exploration and production companies in North Dakota. 7. On May 20, 2016 (the Petition Date ), the Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor continues to operate its businesses and manage its properties as debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in the EAST\126325559.2 2
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 3 of 9 above-captioned chapter 11 cases (the Chapter 11 Cases ). These Chapter 11 Cases are being jointly administered for procedural purposes only pursuant to Bankruptcy Rule 1015(b). 8. Defendant is a limited partnership organized and existing under the laws of Delaware. The Defendant s business address is 2107 City West Blvd., Suite 100, Houston, TX 77042. Defendant is an oil and gas operator with operations in North Dakota. FACTS 9. Prior to the Petition Date and in the ordinary course of business, as a nonoperator, the Debtor entered into numerous oil and gas leases leasing mineral rights from mineral owners in an area known as the Bakken, which encompasses large portions of the Williston Basin in North Dakota. 10. In North Dakota, large companies that drill the wells ( Operators ) must lease sufficient land to be a designated operator of a particular drilling spacing unit ( Drilling Spacing Unit ) by state regulators and that process is standardized and determined during monthly regulatory hearings where operators make their case to be a designated operator. A designated operator controls where and how wells will be drilled within the Drilling Spacing Unit. As such, the Operator controls the capital expenditure ( CAPEX ) pace and timing of each particular drilling unit. 11. North Dakota adheres to a practice called forced pooling, which means the designated operator, by law, must allow all non-op leasehold interests the opportunity to participate in all wells proposed by the operator. This forced pooling allows non-ops, such as the Debtor, to be guaranteed the right (but not the obligation), to participate in any well the Operator plans to drill. If a non-operator elects to participate, such non-operator pays for its proportional EAST\126325559.2 3
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 4 of 9 share of drilling and completion costs and receive its portion of revenue when oil is produced and sold. 12. Historically, this has been the relationship between the Plaintiff and Defendant. The Parties are not parties to a joint operating agreement or any other contract. Plaintiff participates in ninety-six (96) oil wells for which Defendant is the operator. 13. As such, every month, Plaintiff receives a joint interest billing statement (each, a JIB ) from Defendant that details the expenses owed by the Plaintiff for a prior month. In addition, the Plaintiff expects to receive monthly revenue payments from Defendant when oil is produced and sold. 14. Prior to the Petition Date, the Defendant withheld revenue from the Plaintiff in order to satisfy outstanding expenses in the JIBs. As of the Petition Date, the total amount owed by the Debtors with respect to the JIBs was approximately $3,808,421.08 (the Prepetition Claim ). 15. After the Petition Date, without explanation or leave of the Court, Defendant withheld $668,601.32 of revenue (the Receivable ) owed to the Plaintiff, purportedly to be used to set off against the Prepetition Claim. The amount of the Receivable was reflected in the Interest Owner Statement, dated as of June 25, 2016 (the Account Statement ), received by the Plaintiff from the Defendant 16. On July 5, 2016, the Plaintiff sent a letter to Defendant demanding payment of the Receivable. 17. On July 13, 2016, counsel for the Defendant responded by letter asserting the right of recoupment. Thereafter, the Plaintiff requested accounting detail, on a well by well basis, from the Defendant to demonstrate that the expenses accrued and revenue arise from the EAST\126325559.2 4
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 5 of 9 same transaction. Plaintiff then discovered that the Receivable was withheld but not allocated to any particular expenses related to specific wells. 18. As of the filing of this Complaint, the Defendant has not paid the Receivable owed to Plaintiff. CLAIM FOR RELIEF COUNT I: TURNOVER OF ESTATE PROPERTY PURSUANT TO 11 U.S.C. 542(a) forth herein. 19. Plaintiff hereby re-alleges and incorporates all preceding paragraphs as if fully set 20. Section 542(a) of the United States Bankruptcy Code provides, in pertinent part: 11 U.S.C. 542(a). [A]n entity, other than a custodian, in possession, custody, or control during the case, of property that the trustee may use, sell, or lease under section 363 of [the Bankruptcy Code], shall deliver to the trustee, and account for, such property or the value of such property. 21. Section 541 of the Bankruptcy Code provides that a debtor s estate is comprised of, subject to certain exceptions, all legal or equitable interests of the debtor as of the commencement of the case. 11 U.S.C. 541(a)(1). possession. 22. The Receivable is property of the Debtor s estate that is in Defendant s 23. Defendant has failed to deliver the Receivable to the Plaintiff. 24. Therefore, pursuant to 11 U.S.C. 542(a), the Plaintiff is entitled to the turnover of the Receivable. EAST\126325559.2 5
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 6 of 9 COUNT II: VIOLATION OF AUTOMATIC STAY UNDER 11 U.S.C. 362(a)(6) forth herein. 25. Plaintiff hereby re-alleges and incorporates all preceding paragraphs as if fully set 26. Section 362(a)(6) of the Bankruptcy Code provides, in pertinent part: 11 U.S.C. 362(a)(6). [A] petition filed under section 301, 302, or 303 of this title... operates as a stay, applicable to all entities, of... any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title[.] 27. Defendant s withholding of the Receivable was an act to collect on the Prepetition Claim in violation of the automatic stay. 28. Actions taken in violation of the automatic stay are void. 29. Plaintiff requests that this Court issue a judgment that Defendant s withholding of the Receivable was in violation of the automatic stay under section 362(a)(6) of the Bankruptcy Code and directing the Defendant to deliver the Receivable to the Plaintiff as well as all future amounts that become due and payable to the Debtors during the pendency of the bankruptcy on a timely basis. COUNT III: VIOLATION OF AUTOMATIC STAY UNDER 11 U.S.C. 362(a)(7) forth herein. 30. Plaintiff hereby re-alleges and incorporates all preceding paragraphs as if fully set 31. Section 362(a)(7) of the Bankruptcy Code provides, in pertinent part: 11 U.S.C. 362(a)(7). [A] petition filed under section 301, 302, or 303 of this title... operates as a stay, applicable to all entities, of... the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor[.] EAST\126325559.2 6
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 7 of 9 32. Defendant withheld the Receivable to effectuate a setoff against the Prepetition Claim in violation of the automatic stay. 33. Actions taken in violation of the automatic stay are void. 34. Plaintiff requests that this Court issue a judgment that Defendant s setoff of the Receivable against the Prepetition Claim was in violation of the automatic stay under section 362(a)(7) and directing the Defendant to deliver the Receivable to the Plaintiff as well as all future amounts that become due and payable to the Debtors during the pendency of the bankruptcy on a timely basis. forth herein. COUNT IV: TURNOVER OF DEBT PURSUANT TO 11 U.S.C. 542(b) 35. Plaintiff hereby re-alleges and incorporates all preceding paragraphs as if fully set 36. Section 542(b) of the Bankruptcy Code provides, in pertinent part: 11 U.S.C. 542(b). [A]n entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent such debt may be offset under section 553 of [the Bankruptcy Code] against a claim against the debtor. 37. According to the Account Statement, Defendant owed the total Receivable in the amount of $668,601.32 to the Plaintiff. 38. The Receivable is matured, payable on demand and/or payable on order. 39. The Receivable is property of the Debtor s bankruptcy estate. 40. No part of the Receivables may be offset under section 553 of the Bankruptcy Code against a claim against Plaintiff. 41. The Defendant has not paid the Receivable owed to the Plaintiff. EAST\126325559.2 7
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 8 of 9 42. Accordingly, the Plaintiff is entitled to judgment (i) declaring that the Defendant owes $668,601.32 on account of Defendant s failure to pay the Receivable to Plaintiff, and (ii) directing the Defendant to make the payment to Plaintiff in the amount of the Receivable on account of such debt. The foregoing Counts I through IV are without prejudice to any additional claims Plaintiff may have against Defendant. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests that the Court grant the following relief against Defendant as to Counts I through IV of this Complaint, and that the Court enter judgment against Defendant as follows: A. requiring Defendant to turnover or pay the debt or proceeds thereof to, or on the order of, Plaintiff in the amount of $668,601.32 on account of the Receivable; B. a determination that Defendant violated the automatic stay under section 362 of the Bankruptcy Code by withholding the Receivable to collect on the Prepetition Claim and directing the Defendant to deliver the Receivable to the Plaintiff as well as all future amounts that become due and payable to the Debtors during the pendency of the bankruptcy on a timely basis; C. a determination that Defendant violated the automatic stay under section 362 of the Bankruptcy Code by effectuating a setoff of the Receivable against the Prepetition Claim and directing the Defendant to deliver the Receivable to the Plaintiff as well as all future amounts that become due and payable to the Debtors during the pendency of the bankruptcy on a timely basis; EAST\126325559.2 8
Case 16-11247-KJC Doc 172 Filed 08/02/16 Page 9 of 9 D. a determination that Plaintiff s claims against Defendant as set forth herein are without prejudice to any additional claims that Plaintiff may have against Defendant; and E. granting Plaintiff such other and further relief as the Court deems just and proper. Dated: August 2, 2016 Wilmington, Delaware Respectfully submitted, DLA PIPER LLP (US) /s/ Stuart M. Brown Stuart M. Brown (DE 4050) 1201 North Market Street, Suite 2100 Wilmington, DE 19801 Telephone: (302) 468-5700 Facsimile: (302) 394-2341 Email: Stuart.Brown@dlapiper.com -and- Thomas R. Califano (admitted pro hac vice) Dienna Corrado (admitted pro hac vice) 1251 Avenue of the Americas New York, New York 10020 Telephone: (212) 335-4500 Facsimile: (212) 335-4501 Email: Thomas.Califano@dlapiper.com Dienna.Corrado@dlapiper.com Attorneys for Debtors and Debtors in Possession EAST\126325559.2 9