Case Document 13 Filed in TXSB on 01/17/17 Page 1 of 29

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1 Case Document 13 Filed in TXSB on 01/17/17 Page 1 of 29 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: Chapter 11 MEMORIAL PRODUCTION Case No. 17- ( ) PARTNERS LP, et al., (Joint Administration Requested) Debtors. 1 (Emergency Hearing Requested) EMERGENCY MOTION OF DEBTORS PURSUANT TO 11 U.S.C. 105(a) AND 363(b) FOR INTERIM AND FINAL ORDERS (I) AUTHORIZING DEBTORS TO PAY JOINT INTEREST BILLINGS, INTEREST OWNER PAYMENTS, AND E&P OPERATING EXPENSES IN THE ORDINARY COURSE, AND (II) AUTHORIZING FINANCIAL INSTITUTIONS TO HONOR AND PROCESS CHECKS AND TRANSFERS RELATED TO SUCH OBLIGATIONS THIS MOTION SEEKS AN ORDER THAT MAY ADVERSELY AFFECT YOU. IF YOU OPPOSE THE MOTION, YOU SHOULD IMMEDIATELY CONTACT THE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITHIN 21 DAYS OF THE DATE THIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRANTED WITHOUT FURTHER NOTICE TO YOU. IF YOU OPPOSE THE MOTION AND HAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE HEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE HEARING AND MAY DECIDE THE MOTION AT THE HEARING. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEY. EMERGENCY RELIEF HAS BEEN REQUESTED. IF THE COURT CONSIDERS THE MOTION ON AN EMERGENCY BASIS, THEN YOU WILL HAVE LESS THAN 21 DAYS TO ANSWER. IF YOU OBJECT TO THE REQUESTED RELIEF OR IF YOU BELIEVE THAT THE EMERGENCY CONSIDERATION IS NOT WARRANTED, YOU SHOULD FILE AN IMMEDIATE RESPONSE. 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Memorial Production Partners LP (6667); Memorial Production Partners GP LLC; MEMP Services LLC (1887); Memorial Production Operating LLC; Memorial Production Finance Corporation (3356); WHT Energy Partners LLC; WHT Carthage LLC; Memorial Midstream LLC; Beta Operating Company, LLC; Columbus Energy, LLC; Rise Energy Operating, LLC; Rise Energy Minerals, LLC; Rise Energy Beta, LLC; San Pedro Bay Pipeline Company (1234); and Memorial Energy Services LLC. The Debtors mailing address is 500 Dallas Street, Suite 1600, Houston, Texas

2 Case Document 13 Filed in TXSB on 01/17/17 Page 2 of 29 Memorial Production Partners LP ( MEMP ) and its debtor affiliates in the above-captioned chapter 11 cases, as debtors and debtors in possession (collectively, the Debtors ), respectfully represent as follows in support of this motion (this Motion ): Relief Requested 1. Pursuant to sections 105(a) and 363(b) of title 11 of the United States Code (the Bankruptcy Code ), the Debtors request authority to pay in the ordinary course of business their undisputed, liquidated amounts owing to (i) operators for unpaid joint interest billings and related obligations (the JIB Payments ); (ii) holders of royalty, working, and other interests as required by the Debtors various leases and related agreements including, without limitation, Royalties, ORRI Payments, Non-Operator Disbursements, and Suspense Obligations (each as herein defined, and collectively, the Interest Owner Payments ); and (iii) third parties for certain lease operating expenses, other exploration and production costs, capital expenditures, and related costs (the E&P Operating Expenses and, together with the JIB Payments and Interest Owner Payments, the Obligations ), including vendors, contractors, subcontractors, drillers, haulers, and suppliers of oil- and gas-related services, supplies, and materials who may have, or may be entitled to, liens under applicable state law (collectively, the E&P Claimants ). 2. The estimated amounts of Obligations outstanding as of the Petition Date and coming due prior to a final hearing on this Motion are summarized in the following table. Category Description of Obligation Estimated Amount Outstanding as of the Petition Date Estimated Amount Due Prior to the Final Hearing JIB Payments Payments in the ordinary course to Operators for the Debtors share of operating expenses owed for nonoperated wells and leases. $5.3 million $2.2 million 2

3 Case Document 13 Filed in TXSB on 01/17/17 Page 3 of 29 Category Description of Obligation Estimated Amount Outstanding as of the Petition Date Estimated Amount Due Prior to the Final Hearing Interest Owner Payments E&P Operating Expenses Payments in the ordinary course to holders of royalty, working, and other interests as required by the Debtors various leases and related agreements, including, without limitation, Royalties, ORRI Payments, Non-Operator Disbursements, and Suspense Obligations. Payments in the ordinary course to third parties for certain lease operating expenses, other exploration and production costs, capital expenditures, and related costs. $31.2 million $13.7 million $28.1 million $20.4 million Total: $64.6 million $36.3 million 3. The Debtors also request that the Court authorize financial institutions to receive, process, honor, and pay all checks presented for payment and electronic payment requests relating to the Obligations to the extent the Debtors have sufficient funds standing to their credit with such bank, whether such checks were presented or electronic requests were submitted before or after the Petition Date, and that all such financial institutions be authorized to rely on the Debtors designation of any particular check or electronic payment request as appropriate pursuant to this Motion without any duty of further inquiry and without liability for following the Debtors instructions. 4. Proposed forms of order granting the relief requested herein on an interim and final basis are annexed hereto as Exhibit A (the Proposed Interim Order ) and Exhibit B (the Proposed Final Order ), respectively. Jurisdiction 5. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and 1334 and the Order of Reference to Bankruptcy Judges, General Order (S.D. Tex. May 24, 2012) (Hinojosa, C.J.). This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C and

4 Case Document 13 Filed in TXSB on 01/17/17 Page 4 of 29 Background 6. On the date hereof (the Petition Date ), each of the Debtors commenced with this Court a voluntary case under chapter 11 of the Bankruptcy Code. The Debtors continue to operate their business and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee of creditors has been appointed in these chapter 11 cases. Contemporaneously herewith, the Debtors have filed a motion requesting joint administration of these chapter 11 cases pursuant to Bankruptcy Rule 1015(b) and Rule of the Local Rules. 7. Additional information regarding the circumstances leading to the commencement of these chapter 11 cases and information regarding the Debtors business and capital structure is set forth in the Declaration of Robert L. Stillwell, Jr. in Support of the Debtors Chapter 11 Petitions and Related Requests for Relief (the Stillwell Declaration ), which has been filed contemporaneously herewith. The Obligations 8. As described more fully herein, the Debtors believe that, as of the Petition Date, the aggregate amount of prepetition Obligations is approximately $64.6 million, of which approximately $36.3 million will come due prior to a final hearing on the Motion. The various components of the Obligations are described in further detail below. A. Joint Interest Billings 9. The Debtors hold working interests (the Working Interests ) in various oil and gas fields throughout the United States. A working interest entitles the owner of that interest to all or a share of the mineral production from the property; the working interest owner bears the costs of exploration, development, and operation of the property, and, in return, is entitled to a share of the mineral production from the property or of the proceeds therefrom. 4

5 Case Document 13 Filed in TXSB on 01/17/17 Page 5 of 29 McCall v. Chesapeake Energy Corp., 817 F. Supp. 2d 307, 310 n.3 (S.D.N.Y. 2011) (quotation omitted); Dernick Res., Inc. v. Wilstein, 312 S.W.3d 864, 868 n.3 (Tex. App. 2009); Kansas City Royalty Co. L.L.C. v. Thoroughbred Assocs., L.L.C., 215 F.R.D. 628, 631 (D. Kan. 2003). Oil and gas exploration and production ( E&P ) is, by its nature, a speculative business; holders of working interests often buy, sell, and trade portions of their working interests in oil and gas leases to other E&P companies. By this process, E&P companies such as the Debtors become joint holders of working interests in oil and gas leases sharing pro rata in both the revenues and costs associated with production from such leases. This simple method of risk allocation is common in the oil and gas industry. 10. Parties that jointly own an oil and gas lease enter into an operating agreement that governs the relationship among such parties. The operating agreement designates one of the joint interest holders as the operator of the oil and gas lease (as such, the Operator ) and allocates the costs and revenues associated with the operation of the oil and gas lease among those parties. The Operator assumes responsibility for the physical operation and control of a well. See, e.g., Tex. Nat. Res. Code Ann (a)(2) (2015). It conducts the day-to-day business of extracting oil and gas from the wells and initially covers expenses incurred in such operations. The Operator then seeks repayment from the other parties to the operating agreement The other parties to the operating agreement hold non-operating working interests in the oil and gas lease (each such party, a Non-Operator ). The primary obligation 2 Standard operating agreements contain a bankruptcy clause providing, among other consequences, that if the operator commences a bankruptcy case, it shall be deemed to have resigned without any action by the nonoperators (the Resignation Provision ). The Debtors submit that the Resignation Provision is an unenforceable ipso facto clause against the Debtors in their capacity as operator. See 11 U.S.C. 365(e)(1); Wilson v. TXO Prod. Corp. (In re Wilson), 69 B.R. 960, 963 (Bankr. N.D. Tex. 1987) (joint operating agreements uniformly held to be executory contracts and can thus be assumed or rejected under Section 365 of the Bankruptcy Code). 5

6 Case Document 13 Filed in TXSB on 01/17/17 Page 6 of 29 of a Non-Operator is to pay its pro rata share of the lease operating expenses and drilling and completion costs under the operating agreement to the Operator. These reimbursement arrangements are known as joint interest billings ( JIBs ). Non-Operators are billed for JIBs in accordance with the terms of the operating agreement. 12. Where the Debtors hold a non-operating working interest, their operating agreement or applicable law may provide the Operator with contractual or statutory liens to secure the Debtors obligations to the Operator under the operating agreement. See, e.g., Kenmore Oil Co. v. Delacroix, 316 So. 2d 468 (La. Ct. App. 1975) (holding under Louisiana law that the operator is entitled to a privilege 3 against a non-operator that had not contributed its share of the costs of operating the oil and gas lease); see also La. Rev. Stat. Ann. 9:4882 (West 2016) ( The operator has a privilege over the property described in [La. Rev. Stat. Ann. ] 9:4883 to secure payment of all obligations incurred in the conduct of operations which the non-operator is personally bound to pay or reimburse. ); Cal. Pub. Res. Code 3330 (West 2016) (providing that operator has a lien on allocated interest of non-operator to secure payment of amounts due); Andrau v. Michigan Wisconsin Pipe Line Co., 712 P.2d 372, (Wyo. 1986) (holding that agreement giving operator a lien over non-operator s working interest and providing the remedy of foreclosure was valid). A Non-Operator s property that may be subject to such liens may include (i) all hydrocarbons or other minerals severed and extracted from, or attributable to, the oil and gas lease; (ii) all accounts and proceeds of sale, contract rights, and general intangibles arising in connection with the sale; and (iii) any and all accessions, additions, and attachments thereto and the proceeds and products therefrom. See generally La. Rev. Stat. Ann. 9:4883 (West 2016); Cal. Pub. Res. Code 3330 (West 2016) (providing for lien on non- 3 Louisiana jurisprudence often uses the word privilege where common law jurisdictions would use the word lien. 6

7 Case Document 13 Filed in TXSB on 01/17/17 Page 7 of 29 operator s interest in all drilling and production equipment and allocated portion of unit production). 13. As such, the Debtors failure to pay JIB Payments timely may result in the imposition of Operators liens against the Debtors non-operating working interests or the production therefrom. Moreover, under section 362(b)(3) of the Bankruptcy Code, the act of perfecting statutory liens, to the extent consistent with section 546(b) of the Bankruptcy Code, is expressly excepted from the effect of the automatic stay. 14. In the twelve months preceding the Petition Date, the Debtors paid approximately $23.5 million in aggregate JIB Payments. Many of the JIB Payments vary in amount and are not easily predictable each month. Nonetheless, failure to pay the JIB Payments timely may provide grounds for contractual or statutory lien rights in favor of Operators against the Debtors non-operating working interests or the Debtors pro rata share of the production therefrom. 15. To continue to receive their share of the production from their working interests and maintain their business relationships with Operators both during and after these chapter 11 cases, the Debtors request authority to pay all undisputed, liquidated, and prepetition JIBs in the ordinary course when due. As of the Petition Date, the Debtors estimate they owe approximately $5.3 million in prepetition JIB Payments under the terms of their operating agreements. B. Royalties and Other Interest Owner Payments 16. Pursuant to various operating agreements, oil and gas leases, and other contractual obligations and arrangements, the Debtors market and sell production from their operated wells and pay the various interest holders their share of sale proceeds. Pursuant to their oil and gas leases, the owners of the mineral rights leased by the Debtors (the Royalty Interest 7

8 Case Document 13 Filed in TXSB on 01/17/17 Page 8 of 29 Owners ) retain a share of the production on their respective leases, free from any of the expenses of production (the Royalties ), which the Debtors are obligated to remit. In addition, as a result of certain assignments of working interests in the oil and gas leases, additional rights to share in production, free from expenses of production, have been created, and are known as overriding royalty interests (each, an ORRI ). 4 The Debtors are obligated to remit to owners of ORRIs (the ORRI Owners ) their share of proceeds from production attributable to such ORRIs (the ORRI Payments ). Furthermore, Non-Operators may also own interests in the leases and wells operated by the Debtors under joint operating agreements (the Non-Operators together with the ORRI Owners and Royalty Interest Owners, the Interest Owners ). Non- Operators may be contractually entitled to receive a share of the production, subject to the expenses of production (the Non-Operator Disbursements ). 17. The Debtors make Interest Owner Payments to various Interest Owners each month. Such payments are generally paid two months in arrears. Amounts owed are calculated as provided for in the underlying contract, lease, or ORRI instrument, but are typically based on the production revenue received by the Debtors from purchasers, less applicable severance taxes and, in some instances, certain post-production charges. 18. As of the Petition Date, the Debtors estimate that they owe approximately $18.2 million to Interest Owners on account of accrued and undisputed Interest Owner Payments, of which approximately $8.7 million will come due within the first 30 days of these chapter 11 cases. 5 4 ORRIs may include, among other things, non-possessory interests in the minerals produced at the surface of the land, nonparticipating interests in oil and gas production, interests in the net profits or a specified quantum of the mineral production output, and other unleased mineral interests that may be granted pursuant to state or other applicable law. 5 These amounts do not take account of payments that may be made to Interest Holders directly from purchasers. 8

9 Case Document 13 Filed in TXSB on 01/17/17 Page 9 of The Debtors hold Interest Owner Payments in suspense when (i) they are too small to warrant payment under the terms of the operating agreement or other operating instruments, (ii) the Debtors have determined they should not be paid because of a dispute or for other legal reasons, or (iii) the Debtors are unable to identify or properly pay the relevant Interest Owner (such amounts held in suspense, the Suspense Obligations ). 20. The Suspense Obligations are accrued but unpaid liabilities of the Debtors. The Debtors estimate that approximately $5 million out of the total $13 million in Suspense Obligations will become due and payable in the ordinary course of the Debtors business and operations (either through accrual of additional royalties or resolution of a dispute or other issue barring payment) prior to disposition of the Motion on a final basis. The Debtors do not anticipate being obligated to pay the full amount of remaining Suspense Obligations during these chapter 11 cases; however, in light of the difficulty in estimating precisely when and to what extent Suspense Obligations will become due and payable, and out of an abundance of caution, the Debtors seek authority in the Proposed Final Order to continue to negotiate, resolve, settle, and honor the full amount of outstanding Suspense Obligations in the ordinary course whether such amounts relate to the prepetition or post petition period. 21. Non-payment of Interest Owner Payments, including Suspense Obligations after the Debtors have determined they should no longer be held in suspense, could jeopardize the Debtors oil and gas leases. Interest Owners are paid in arrears and must be paid promptly. As set forth below, Interest Owners may be able to make claims that their share of production revenue is not property of the Debtors estates or may be able to argue that lease maintenance may be called into question, leading to a lease termination claim. Further, failure to make the Interest Owner Payments could potentially result in the imposition of liens in favor of 9

10 Case Document 13 Filed in TXSB on 01/17/17 Page 10 of 29 Interest Owners in production, as extracted minerals, and the proceeds therefrom to secure the obligations of the first purchaser to pay the purchase price of the minerals sold. See Tex. Bus. & Com. Code Ann (West). 22. To the extent the Debtors and any Interest Owners dispute the amounts owed, the Debtors will segregate the funds they believe are owed pending an agreement. Accordingly, the Debtors believe payment of the amounts owed to Interest Owners is in the best interests of the Debtors and their estates. C. E&P Operating Expenses 23. In the ordinary course of business, the Debtors serve as Operators of certain oil and gas leases and contract with the E&P Claimants, which provide goods and services necessary to operate wells. As a result, the Debtors incur E&P Operating Expenses in connection with their operating interests, including amounts related to gathering, transportation, and processing expenses ( GTP Expenses ), capital expenditures ( Capex ), surface use and land-related payments, and lease operating expenses ( LOEs ). In accordance with the terms of their operating agreements, the Debtors are reimbursed for the Non-Operators shares of the pro rata costs of production through the payment of JIBs or by netting a Non-Operator s share of production revenue against its share of E&P Operating Expenses under the operating agreement. Under applicable law, E&P Claimants may be entitled to assert liens against the Debtors property (or even the property of other parties to the operating agreements) to secure payment from the Debtors. 24. If the E&P Claimants were able to assert liens against the Debtors assets in the course of these chapter 11 cases, the results would be detrimental to the Debtors and their estates. The E&P Claimants could potentially place liens on the wells, the production therefrom, or the Debtors operating interests. As such, the Debtors revenues and their relationships with 10

11 Case Document 13 Filed in TXSB on 01/17/17 Page 11 of 29 joint interest owners could be jeopardized if the Court does not grant the relief requested herein. As of the Petition Date, the Debtors estimate they have approximately $28.1 million in outstanding prepetition E&P Operating Expenses, including approximately $7.5 million in GTP Expenses, $5.9 million in Capex, and $14.7 million in LOEs. Payment of The Obligations Is Warranted 25. The Court may grant the relief requested herein pursuant to sections 363(b) and 105(a) of the Bankruptcy Code. Section 363 of the Bankruptcy Code provides, in relevant part, that [t]he [debtor], after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate. 11 U.S.C. 363(b)(1). Courts in the Fifth Circuit have granted a debtor s request to use property of the estate outside of the ordinary course of business pursuant to section 363(b) of the Bankruptcy Code upon a finding that such use is supported by sound business reasons. See, e.g., Institutional Creditors of Continental Air Lines, Inc. v. Continental Air Lines, Inc. (In re Continental Air Lines), 780 F.2d 1223, 1226 (5th Cir. 1986) ( [F]or a debtor-in-possession or trustee to satisfy its fiduciary duty to the debtor, creditors and equity holders, there must be some articulated business justification for using, selling, or leasing the property outside the ordinary course of business. ); see also In re Crutcher Res. Corp., 72 B.R. 628, 631 (Bankr. N.D. Tex. 1987) ( A Bankruptcy Judge has considerable discretion in approving a 363(b) sale of property of the estate other than in the ordinary course of business, but the movant must articulate some business justification for the sale. ); In re Terrace Gardens Park P ship, 96 B.R. 707, 714 (Bankr. W.D. Tex. 1989). 26. In addition, under section 1107(a) of the Bankruptcy Code, a debtor in possession has, among other things, the implied duty of the debtor-in-possession to protect and preserve the estate, including an operating business going-concern value. In re CEI Roofing, Inc., 315 B.R. 50, 59 (Bankr. N.D. Tex. 2004) (quoting In re CoServ, L.L.C., 273 B.R. 487,

12 Case Document 13 Filed in TXSB on 01/17/17 Page 12 of 29 (Bankr. N.D. Tex. 2002). Under section 105(a) of the Bankruptcy Code, [t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. See CoServ, 273 B.R. at 497 (holding that sections 105 and 1107 of the Bankruptcy Code provide the authority for a debtor-in-possession to pay prepetition claims necessary for the preservation or enhancement of the estate); CEI Roofing, 315 B.R. at 56; In re Mirant Corp., 296 B.R. 427 (Bankr. N.D. Tex. 2003); In re Tusa-Expo Holdings, Inc., Ch. 11 Case No DML-11, 2008 WL , at *1 (Bankr. N.D. Tex. Nov. 7, 2008). Moreover, Bankruptcy Rule 6003 itself implies that the payment of prepetition obligations may be permissible within the first 21 days of a case where doing so is necessary to avoid immediate and irreparable harm. Accordingly, the Bankruptcy Code authorizes the postpetition payment of prepetition claims where, as here, such payments are critical to preserving the going-concern value of the debtors estates. 27. Here, prompt payment of the Obligations is necessary to preserve the Debtors operations and successfully reorganize. Payment of the JIBs is necessary to prevent the Operators from ceasing or altering their revenue payments to the Debtors and potentially asserting liens against the Debtors non-operating working interests or their share of revenues from production. JIB Payments and Interest Owner Payments are also necessary to maintain strong working relationships with these important joint partners both during and after the pendency of these chapter 11 cases. 28. Similarly, satisfying the E&P Operating Expenses incurred for equipment, supplies, or services essential to the Debtors business will prevent the E&P Claimants from potentially asserting liens on the Debtors property or the property of the Debtors third-party working interest partners and will ensure the Debtors maintain strong working relationships with 12

13 Case Document 13 Filed in TXSB on 01/17/17 Page 13 of 29 the E&P Claimants that will inure to the benefit of all parties in interest. Accordingly, paying the Obligations in the ordinary course is a sound exercise of the Debtors business judgment. Applicable Financial Institutions Should Be Authorized to Receive, Process, Honor, and Pay Checks Issued and Transfers Requested to Pay the Obligations 29. The Debtors further request that the Court authorize applicable financial institutions to receive, process, honor, and pay any and all checks issued, or to be issued, and electronic funds transfers requested, or to be requested, by the Debtors relating to the Obligations, to the extent that sufficient funds are on deposit and standing in the Debtors credit in the applicable bank accounts to cover such payment. The Debtors also seek authority to issue new postpetition checks or effect new postpetition electronic funds transfers in replacement of any checks or transfer requests on account of prepetition Obligations dishonored or rejected as a result of the commencement of the Debtors chapter 11 cases.. Bankruptcy Rule 6003 Has Been Satisfied 30. Bankruptcy Rule 6003 provides that, to the extent relief is necessary to avoid immediate and irreparable harm, a bankruptcy court may issue an order granting a motion to use, sell, lease, or otherwise incur an obligation regarding property of the estate, including a motion to pay all or part of a claim that arose before the filing of the petition before 21 days after filing of the petition. As set forth in this Motion, the Debtors believe an immediate and orderly transition into chapter 11 is critical to both the viability of their operations and preserving the value of the Debtors estates and, therefore, any delay in granting the relief requested could cause irreparable harm. Furthermore, the failure to receive the requested relief during the first 21 days of these chapter 11 cases could result in the disruption of the Debtors operations at this critical juncture and imperil the Debtors restructuring. Accordingly, the Debtors have satisfied the requirements of Bankruptcy Rule

14 Case Document 13 Filed in TXSB on 01/17/17 Page 14 of 29 Request for Bankruptcy Rule 6004 Waivers 31. The Debtors request a waiver of the notice requirements under Bankruptcy Rule 6004(a) and any stay of the order granting the relief requested herein pursuant to Bankruptcy Rule 6004(h). As explained above and in the Stillwell Declaration, the relief requested herein is necessary to avoid immediate and irreparable harm to the Debtors. Accordingly, ample cause exists to justify the waiver of the notice requirements under Bankruptcy Rule 6004(a) and the 14-day stay imposed by Bankruptcy Rule 6004(h), to the extent such stay applies. Reservation of Rights 32. Nothing contained herein is intended to be or shall be construed as (i) an admission as to the validity of any claim against the Debtors, (ii) a waiver of the Debtors or any party in interest s rights to dispute any claim, (iii) a waiver of the Debtors or any other party in interest s rights under the Bankruptcy Code or any other applicable law, or (iv) an approval or assumption of any agreement, contract, program, policy, or lease under section 365 of the Bankruptcy Code. Likewise, if the Court grants the relief sought herein, any payment made pursuant to the Court s order is not intended to be and should not be construed as an admission to the validity of any claim or a waiver of the Debtors or any party in interest rights to dispute such claim subsequently. Notice 33. No trustee, examiner, or statutory committee of creditors has been appointed in these chapter 11 cases. Notice of this Motion has been provided to (i) the Office of the United States Trustee for the Southern District of Texas; (ii) the Debtors 30 largest unsecured creditors on a consolidated basis; (iii) Wells Fargo Bank, National Association, as administrative agent (the Prepetition Agent ) under that certain Credit Agreement, dated as of 14

15 Case Document 13 Filed in TXSB on 01/17/17 Page 15 of 29 December 14, 2011, as amended; (iv) Linklaters LLP, 1345 Avenue of the Americas, New York, New York (Attn: Margot Schonholtz, Esq. and Penelope Jensen, Esq.) as counsel to the Prepetition Agent; (v) Vinson & Elkins LLP, 2001 Ross Avenue, Suite 3700, Dallas, TX (Attn: Paul Heath, Esq. and Bradley Foxman, Esq.) as counsel to the Prepetition Agent; (vi) Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, NY (Attn: Brian Resnick, Esq. and Angela Libby Esq.) as counsel to the ad hoc group of unsecured noteholders; (vii) Wilmington Trust, National Association, as successor trustee under (a) that certain Indenture, dated as of April 17, 2013, for the issuance of 7 5/8% Senior Notes due 2021, as amended and supplemented, and (b) that certain Indenture, dated as of July 17, 2014, for the issuance of 6 7/8% Senior Notes due 2022, as amended and supplemented; (viii) Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York (Attn: Erez E. Gilad, Esq.) as counsel to Wilmington Trust, National Association; (ix) the Securities and Exchange Commission; (x) the Internal Revenue Service; (xi) the United States Attorney s Office for the Southern District of Texas; and (xii) those persons who have formally appeared in these chapter 11 cases and requested service pursuant to Bankruptcy Rule In addition to the foregoing, notice of this Motion and any order entered hereon will be served on all parties required by Local Rule (d) (collectively with the parties listed in the preceding paragraph, the Notice Parties ). Based on the urgency of the circumstances surrounding this Motion and the nature of the relief requested herein, the Debtors respectfully submit that no further notice is required. 15

16 Case Document 13 Filed in TXSB on 01/17/17 Page 16 of 29 WHEREFORE the Debtors respectfully request entry of the Proposed Interim Order and Proposed Final Order granting the relief requested herein and such other and further relief as the Court may deem just and appropriate. Dated: January 16, 2017 Houston, Texas /s/ Alfredo R. Pérez WEIL, GOTSHAL & MANGES LLP Alfredo R. Pérez ( ) 700 Louisiana Street, Suite 1700 Houston, Texas Telephone: (713) Facsimile: (713) and- WEIL, GOTSHAL & MANGES LLP Gary T. Holtzer (pro hac vice pending) Joseph H. Smolinsky (pro hac vice pending) 767 Fifth Avenue New York, New York Telephone: (212) Facsimile: (212) Proposed Attorneys for the Debtors and Debtors in Possession 16

17 Case Document 13 Filed in TXSB on 01/17/17 Page 17 of 29 Certificate of Service I hereby certify that a true and correct copy of the foregoing document was served by the Electronic Case Filing System for the United States Bankruptcy Court for the Southern District of Texas, and will be served as set forth in the Affidavit of Service to be filed by the Debtors proposed claims, noticing, and solicitation agent. /s/ Alfredo R. Pérez WEIL, GOTSHAL & MANGES LLP Alfredo R. Pérez ( ) 700 Louisiana Street, Suite 1700 Houston, Texas Telephone: (713) Facsimile: (713)

18 Case Document 13 Filed in TXSB on 01/17/17 Page 18 of 29 Exhibit A Proposed Interim Order

19 Case Document 13 Filed in TXSB on 01/17/17 Page 19 of 29 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: Chapter 11 MEMORIAL PRODUCTION Case No. 17- ( ) PARTNERS LP, et al., (Jointly Administered) Debtors. 1 Re: Docket No. INTERIM ORDER PURSUANT TO 11 U.S.C. 105(a) AND 363(b) (I) AUTHORIZING DEBTORS TO PAY JOINT INTEREST BILLINGS, INTEREST OWNER PAYMENTS, AND E&P OPERATING EXPENSES IN THE ORDINARY COURSE, AND (II) AUTHORIZING FINANCIAL INSTITUTIONS TO HONOR AND PROCESS CHECKS AND TRANSFERS RELATED TO SUCH OBLIGATIONS Upon the motion, dated January 16, 2017 (the Motion ), 2 of Memorial Production Partners LP ( MEMP ) and its affiliated debtors, as debtors and debtors in possession (collectively, the Debtors ), for (i) authority to pay all undisputed, liquidated amounts owing with respect to the Obligations and (ii) authority for applicable financial institutions to receive, honor, process, and pay all checks and wire transfers drawn on the Debtors accounts related thereto, as more fully set forth in the Motion; and upon consideration of the Stillwell Declaration; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334, and the Order of Reference to Bankruptcy Judges, General Order (S.D. Tex. May 24, 2012) (Hinojosa, C.J.); and 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Memorial Production Partners LP (6667); Memorial Production Partners GP LLC; MEMP Services LLC (1887); Memorial Production Operating LLC; Memorial Production Finance Corporation (3356); WHT Energy Partners LLC; WHT Carthage LLC; Memorial Midstream LLC; Beta Operating Company, LLC; Columbus Energy, LLC; Rise Energy Operating, LLC; Rise Energy Minerals, LLC; Rise Energy Beta, LLC; San Pedro Bay Pipeline Company (1234); and Memorial Energy Services LLC. The Debtors mailing address is 500 Dallas Street, Suite 1600, Houston, Texas All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Motion.

20 Case Document 13 Filed in TXSB on 01/17/17 Page 20 of 29 consideration of the Motion and the requested relief being a core proceeding pursuant to 28 U.S.C. 157(b); and venue being proper before this Court pursuant to 28 U.S.C and 1409; and due and proper notice of the Motion having been provided to the Notice Parties, and it appearing that no other or further notice need be provided; and the Court having reviewed the Motion; and the Court having held a hearing on the Motion on, 2017; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtors and their respective estates and creditors; and the Court having found and determined that the relief sought in the Motion is necessary to avoid immediate and irreparable harm to the Debtors and their estates as contemplated by Bankruptcy Rule 6003; and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT: 1. The Motion is granted on an interim basis as provided herein. 2. The Debtors are authorized pursuant to sections 105(a) and 363(b) of the Bankruptcy Code, to pay and satisfy the Obligations, whether relating to the period before or after the Petition Date, in an interim amount not to exceed $36.3 million. 3. Any Resignation Provision in the operating agreements, to the extent not otherwise subject to the automatic stay under section 362 of the Bankruptcy Code, constitutes an ipso facto clause and is unenforceable in accordance with section 365(e) of the Bankruptcy Code. 4. All applicable banks and other financial institutions are authorized, but not directed, to receive, process, honor, and pay all checks presented for payment by the Debtors and 2

21 Case Document 13 Filed in TXSB on 01/17/17 Page 21 of 29 to honor all fund transfer requests related to such obligations to the extent that sufficient funds are on deposit and standing in the Debtors credit in the applicable bank accounts to cover such payments. Such applicable banks and other financial institutions are authorized to accept and honor all representations and instructions from the Debtors as to which check, ACH transfer, draft, wire, or other transfer drawn or issued by the Debtors before the Petition Date should be honored pursuant to any order of this Court. Such banks and financial institutions shall not have any liability to any party for (a) relying on this Order or the representations or instructions by the Debtors as provided for herein or any other order of this Court, or (b) honoring or not honoring any check, ACH transfer, draft, wire, or other transfer in a good-faith belief that the Court has or has not authorized the honoring of such check, ACH transfer, draft, wire, or other such transfer. Without limiting the foregoing, all banks and other financial institutions may rely on the representations of the Debtors with respect to whether any check or other payment order drawn or issued by the Debtors prior to the Petition Date should be honored pursuant to this or any other order of this Court, and such banks and financial institutions shall not have any liability to any party for relying on such representations by the Debtors as provided for herein. 5. The Debtors are further authorized to issue postpetition checks, or to effect postpetition fund transfer requests, in replacement of any checks or fund transfer requests that are dishonored as a consequence of these chapter 11 cases with respect to any prepetition amounts that are authorized to be paid pursuant to this Order. 6. Nothing in the Motion or this Order shall be deemed to authorize the Debtors to accelerate any payments not otherwise due prior to the Final Hearing. 7. Nothing contained in the Motion or this Order or any payment made pursuant to the authority granted by this Order is intended to be or shall be construed as (i) an 3

22 Case Document 13 Filed in TXSB on 01/17/17 Page 22 of 29 admission as to the validity of any claim against the Debtors, (ii) a waiver of the Debtors or any party in interest s rights to dispute any claim, (iii) a waiver of the Debtors or any other party in interest s rights under the Bankruptcy Code or any other applicable law, or (iv) an approval or assumption of any agreement, contract, program, policy, or lease under section 365 of the Bankruptcy Code. 8. Notwithstanding anything to the contrary contained herein, any payment to be made, or authorization contained hereunder, shall be subject to the same limitations and restrictions as are provided for in any interim or final order (the Cash Collateral Orders ) entered pursuant to the Emergency Motion of Debtors Pursuant to 11 U.S.C. 105, 361, 362, 363 and 507, Bankruptcy Rules 2002, 4001, 6003, 6004, and 9014 and Bankruptcy Local Rule , inter alia, (I) Authorizing Debtors Limited Use of Cash Collateral, (II) Granting Adequate Protection to the Prepetition Secured Parties, (III) Modifying the Automatic Stay, and (IV) Scheduling a Final Hearing. To the extent there is any conflict between this Order and the Cash Collateral Orders, the terms of the Cash Collateral Orders shall control. 9. The requirements of Bankruptcy Rule 6003(b) have been satisfied. 10. Notice of the Motion as provided herein shall be deemed good and sufficient notice of such Motion and the requirements of Bankruptcy Rule 6004(a) are waived. 11. Notwithstanding the provisions of Bankruptcy Rule 6004(h), this Order shall be immediately effective and enforceable upon its entry. 12. This Order is effective only from the date of entry through this Court s disposition of the Motion on a final basis; provided, that the Court s ultimate disposition of the Motion on a final basis shall not impair or otherwise affect any action taken pursuant to this Order. 4

23 Case Document 13 Filed in TXSB on 01/17/17 Page 23 of The Debtors are authorized to take all steps necessary or appropriate to carry out this Order. 14. This Court shall retain jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order. 15. A final hearing to consider the relief requested in the Motion shall be held on, at (Central Time) and any objections or responses to the Motion shall be filed and served so as to be actually received on or prior to, at 4:00 p.m. (Central Time). Dated:, 2017 Houston, Texas UNITED STATES BANKRUPTCY JUDGE 5

24 Case Document 13 Filed in TXSB on 01/17/17 Page 24 of 29 Exhibit B Proposed Final Order

25 Case Document 13 Filed in TXSB on 01/17/17 Page 25 of 29 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: Chapter 11 MEMORIAL PRODUCTION Case No. 17- ( ) PARTNERS LP, et al., (Joint Administration Requested) Debtors. 1 Re: Docket No. FINAL ORDER PURSUANT TO 11 U.S.C. 105(a) AND 363(b) (I) AUTHORIZING DEBTORS TO PAY JOINT INTEREST BILLINGS, INTEREST OWNER PAYMENTS, AND E&P OPERATING EXPENSES IN THE ORDINARY COURSE, AND (II) AUTHORIZING FINANCIAL INSTITUTIONS TO HONOR AND PROCESS CHECKS AND TRANSFERS RELATED TO SUCH OBLIGATIONS Upon the motion, dated January 16, 2017 (the Motion ), 2 of Memorial Production Partners LP ( MEMP ) and its affiliated debtors, as debtors and debtors in possession (collectively, the Debtors ), for (i) authority to pay all undisputed, liquidated amounts owing with respect to the Obligations and (ii) authority for applicable financial institutions to receive, honor, process, and pay all checks and wire transfers drawn on the Debtors accounts in relation thereto, as more fully set forth in the Motion; and upon consideration of the Stillwell Declaration; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334, and the Order of Reference to Bankruptcy Judges, General Order (S.D. Tex. May 24, 2012) (Hinojosa, C.J.); and consideration of the Motion and the requested relief being a core proceeding pursuant 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Memorial Production Partners LP (6667); Memorial Production Partners GP LLC; MEMP Services LLC (1887); Memorial Production Operating LLC; Memorial Production Finance Corporation (3356); WHT Energy Partners LLC; WHT Carthage LLC; Memorial Midstream LLC; Beta Operating Company, LLC; Columbus Energy, LLC; Rise Energy Operating, LLC; Rise Energy Minerals, LLC; Rise Energy Beta, LLC; San Pedro Bay Pipeline Company (1234); and Memorial Energy Services LLC. The Debtors mailing address is 500 Dallas Street, Suite 1600, Houston, Texas All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Motion.

26 Case Document 13 Filed in TXSB on 01/17/17 Page 26 of 29 to 28 U.S.C. 157(b); and venue being proper before this Court pursuant to 28 U.S.C and 1409; and due and proper notice of the Motion having been provided to the Notice Parties, and it appearing that no other or further notice need be provided; and the Court having reviewed the Motion; and the Court having held a hearing on the Motion on January, 2017; and the Court having granted interim relief on the Motion on January, 2017 (Docket No. ); and the Court having held a final hearing on the Motion on ; and all objections to the Motion having been withdrawn, resolved, or overruled; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtors and their respective estates and creditors; and the Court having found and determined that the relief sought in the Motion is necessary to avoid immediate and irreparable harm to the Debtors and their estates as contemplated by Bankruptcy Rule 6003; and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT: 1. The Motion is granted. 2. The Debtors are authorized pursuant to sections 105(a) and 363(b) of the Bankruptcy Code, to pay and satisfy Obligations, whether relating to the period before or after the Petition Date. 3. Any Resignation Provision in the operating agreements, to the extent not otherwise subject to the automatic stay under section 362 of the Bankruptcy Code, constitutes an ipso facto clause and is unenforceable in accordance with section 365(e) of the Bankruptcy Code. 2

27 Case Document 13 Filed in TXSB on 01/17/17 Page 27 of All applicable banks and other financial institutions are authorized, but not directed, to receive, process, honor, and pay all checks presented for payment by the Debtors and to honor all fund transfer requests related to such obligations to the extent that sufficient funds are on deposit and standing in the Debtors credit in the applicable bank accounts to cover such payments. Such applicable banks and other financial institutions are authorized to accept and honor all representations and instructions from the Debtors as to which check, ACH transfer, draft, wire, or other transfer drawn or issued by the Debtors before the Petition Date should be honored pursuant to any order of this Court. Such banks and financial institutions shall not have any liability to any party for (a) relying on this Order or the representations or instructions by the Debtors as provided for herein or any other order of this Court, or (b) honoring or not honoring any check, ACH transfer, draft, wire, or other transfer in a good-faith belief that the Court has or has not authorized the honoring of such check, ACH transfer, draft, wire, or other such transfer. Without limiting the foregoing, all banks and other financial institutions may rely on the representations of the Debtors with respect to whether any check or other payment order drawn or issued by the Debtors prior to the Petition Date should be honored pursuant to this or any other order of this Court, and such banks and financial institutions shall not have any liability to any party for relying on such representations by the Debtors as provided for herein. 5. The Debtors are further authorized to issue postpetition checks, or to effect postpetition fund transfer requests, in replacement of any checks or fund transfer requests that are dishonored as a consequence of these chapter 11 cases with respect to any prepetition amounts that are authorized to be paid pursuant to this Order. 6. Nothing contained in the Motion or this Order or any payment made pursuant to the authority granted by this Order is intended to be or shall be construed as (i) an 3

28 Case Document 13 Filed in TXSB on 01/17/17 Page 28 of 29 admission as to the validity of any claim against the Debtors, (ii) a waiver of the Debtors or any party in interest s rights to dispute any claim, (iii) a waiver of the Debtors or any other party in interest s rights under the Bankruptcy Code or any other applicable law, or (iv) an approval or assumption of any agreement, contract, program, policy, or lease under section 365 of the Bankruptcy Code. 7. Notwithstanding anything to the contrary contained herein, any payment to be made, or authorization contained hereunder, shall be subject to the same limitations and restrictions as are provided for in any interim or final order (the Cash Collateral Orders ) entered pursuant to the Emergency Motion of Debtors Pursuant to 11 U.S.C. 105, 361, 362, 363 and 507, Bankruptcy Rules 2002, 4001, 6003, 6004, and 9014 and Bankruptcy Local Rule , inter alia, (I) Authorizing Debtors Limited Use of Cash Collateral, (II) Granting Adequate Protection to the Prepetition Secured Parties, (III) Modifying the Automatic Stay, and (IV) Scheduling a Final Hearing. To the extent there is any conflict between this Order and the Cash Collateral Orders, the terms of the Cash Collateral Orders shall control. 8. Notice of the Motion as provided herein shall be deemed good and sufficient notice of such Motion and the requirements of Bankruptcy Rule 6004(a) are waived. 9. Notwithstanding the provisions of Bankruptcy Rule 6004(h), this Order shall be immediately effective and enforceable upon its entry. 10. The Debtors are authorized to take all steps necessary or appropriate to carry out this Order. 4

29 Case Document 13 Filed in TXSB on 01/17/17 Page 29 of This Court shall retain jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order. Dated:, 2017 Houston, Texas UNITED STATES BANKRUPTCY JUDGE 5