Businesses of all types and sizes throughout the United States, Mexico and beyond bring their disputes to Gardere's litigation team and receive practical, responsive, boutique-style attention in return. Our clients have access to the firepower and value of a well-known and highly-regarded Firm's capabilities and interdisciplinary strengths.
Gardere has a national and international energy practice formed around our Energy Industry Team, which is a multidisciplinary group of approximately 60 attorneys with diverse backgrounds, experience and skills specific to the energy industry. Our team includes attorneys who have served as in-house counsel for major energy companies, providing a depth of insight into our clients' needs, issues and concerns. We understand and regularly practice in virtually every sector of the energy, and we represent a wide variety of industry participants from multinational corporations to individuals.
From our offices in the United States and Mexico, our International Practice helps clients operate in today’s global economy. We have more than 30 professionals operating as a boutique within an Am Law 200 law firm and are able to provide focused service with the resources of a large firm. We understand that clients who are engaged in the global marketplace need lawyers who can operate seamlessly across multiple jurisdictions. Our international experts are multi-lingual, are culturally fluent and intimately familiar with various legal systems across the world, especially those in Latin America. Whether you need help with commercial transactions, regulatory matters, customs and import regulations, immigration matters, M&A and joint ventures, international disputes, or international tax planning, Gardere’s international team is here to assist you.
We represent domestic and foreign private funds in all aspects of fund formation, fund operations, platform and add-on acquisitions, and portfolio company operations. Our team has a reputation for being the go-to-lawyers for private equity funds, hedge funds, venture capital funds and family offices. We are known for our vast deal experience, the efficient way we staff and manage our work, and the way we maintain our relationships. We get deals done with sophisticated, strategic, and practical advice tailored to the needs of our clients.
*Not admitted to practice law.
Private equity funds have, and will continue to, invest throughout the capital structure of exploration and production (“E&P”) companies. Investors (and sometimes vendors) acquire interests in an E&P company’s production by buying overriding royalty interests (“ORRI”), which can be perpetual or term overrides. Alternatively, investors acquire production payments, which are more closely aligned with debt instruments, as the production payments terminates when a specific amount of money or production has been received by the investor. As oil and natural gas prices remain low (and the leverage of many E&P companies remains high), PE investors may need to protect their investments and mitigate the risks of an operator failing.
In a common ORRI arrangement, the operator of the wells (i.e., the E&P company) will sell the production of the well, comprised of both the working interest owners’ production as well as that of the holders of ORRIs. Such an arrangement can result in one-to-two months’ production proceeds of an ORRI being in the hands of the operator. As an E&P company begins to experience cash flow issues, an attractive source of near-term cash can be the proceeds of production of ORRIs. Such was the case in the bankruptcy of ATP Oil & Gas. At the “first-day” hearing in ATP’s bankruptcy case, there was testimony that up to $23.4 million of production proceeds attributable to ORRIs and net profits interests had been collected and spent by ATP (the operator) on operating costs, rather than being remitted to the holders of the ORRIs and NPIs.
Every holder of an ORRI wants the operator to be successful (resulting in hydrocarbons being produced and the proceeds being remitted to, among others, ORRI holders). Unfortunately, however, situations arise wherein an over-levered operator faces the dilemma of remitting production proceeds to ORRI holders versus making a debt payment to avoid a default (or paying trade creditors to avoid M&M liens, or any number of demands on cash flow). In such a scenario, holders of ORRI want to be protected against proceeds of their production being spent elsewhere.
To ensure that the operator does not comingle ORRI production proceeds with proceeds of working interests, “lose” the funds, or have the funds attached by the liens of a secured bank lender or other creditor, an ORRI holder can direct the first purchaser of production to send the proceeds directly to the ORRI holder by submitting to the first purchaser a division order” signed by the operator. This alerts the first purchaser as to the specified amount of hydrocarbons that are owned by the ORRI holder such that the proceeds of ORRI production will be paid directly to the ORRI holder.
In larger transactions, the ORRI may have numerous participants or be syndicated among of number of investors. In such a transaction, another way to protect against a cash-strapped operator diverting ORRI production proceeds to a party other than the ORRI holders is through an escrow arrangement whereby the operator sells the production of the well (including production of working interests and ORRIs) to the first purchaser, but the proceeds attributable to the ORRI are paid by the first purchaser to an escrow agent (that remits the proceeds to the ORRI holder), rather than to the operator. This relatively simple arrangement minimizes the amount of ORRI production proceeds that flow through the hands of the operator, thereby mitigating the risk of an ORRI holder’s proceeds being diverted to fund the operating expenses of a failing operator, without requiring a division order that directs payments to each of the investor participants.
The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.
You may use the wildcard symbol (*) as a root expander. A search for "anti*" will find not only "anti", but also "anti-trust", "antique", etc.
Entering two terms together in a search field will behave as though an "OR" is being used. For example, entering "Antique Motorcars" as a Client Name search will find results with either word in the Client Name.
AND and OR may be used in a search. Note: they must be capitalized, e.g., "Project AND Finance."
The + and - sign operators may be used. The + sign indicates that the term immediately following is required, while the - sign indicates to omit results that contain that term. E.g., "+real -estate" says results must have "real" but not "estate".
To perform an exact phrase search, surround your search phrase with quotation marks. For example, "Project Finance".
Searches are not case sensitive.