Case KG Doc 90 Filed 07/31/15 Page 1 of 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE. Chapter 11 : : : :

Transcription

1 Case KG Doc 90 Filed 07/31/15 Page 1 of 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re MILAGRO HOLDINGS, LLC, et al., Debtors x Chapter 11 Case No (KG) Jointly Administered Hearing Date August 21, 2015, at 1100 a.m. (ET) Objection Deadline August 14, 2015, at 400 p.m. (ET) WAIVER OF LOCAL RULE REQUESTED DEBTORS APPLICATION TO RETAIN BALMORAL ADVISORY SERVICES LLC AS FINANCIAL ADVISOR AND INVESTMENT BANKER FOR THE DEBTORS, EFFECTIVE AS OF THE PETITION DATE The above-captioned debtors and debtors in possession (collectively, the Debtors ) hereby apply (the Application ) to the Court for entry of an order, pursuant to sections 327(a) and 328(a) of chapter 11 of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code ), as supplemented by Rule 2014 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) and Rules and (h) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Code for the District of Delaware (the Local Rules ), (i) authorizing the employment and retention of Balmoral Advisory Services LLC ( Balmoral Advisory ) as financial advisor and investment banker to the Debtors, effective as of the Petition Date (as defined below) and (ii) modifying certain informational requirements of Local Rule In support of this Application, the Debtors (i) rely on the declaration of Skip Victor (the Victor Declaration ), attached hereto as 1 The Debtors in these cases, along with the last four digits of each Debtor s federal tax identification number, are Milagro Holdings, LLC (7232); Milagro Oil & Gas, Inc. (7173); Milagro Exploration, LLC (9260); Milagro Producing, LLC (9330); Milagro Mid-Continent, LLC (8804); and Milagro Resources, LLC (6134). The Debtors mailing address is 1301 McKinney Street, Suite 500, Houston, Texas

2 Case KG Doc 90 Filed 07/31/15 Page 2 of 16 Exhibit A, and (ii) rely on and incorporate by reference the Declaration of Scott W. Winn in Support of Chapter 11 Petitions and First Day Relief [D.I. 3] (the First Day Declaration ). In further support of this Application, the Debtors respectfully represent Jurisdiction 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334(b) and 157, and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated as of February 29, This matter is a core proceeding pursuant to 28 U.S.C. 157(b)(2), and the Court may enter a final order consistent with Article III of the United States Constitution. 2. Venue is proper in this Court pursuant to 28 U.S.C and The statutory and procedural predicates for the relief requested herein are sections 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014, and Local Rule and (h). Background 4. On July 15, 2015 (the Petition Date ), the Debtors commenced their bankruptcy cases by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code (the Chapter 11 Cases ). No trustee, examiner, or creditors committee has been appointed in the Chapter 11 Cases. The Debtors are operating their respective businesses as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 5. The Debtors are independent energy companies based in Houston, Texas engaged in the acquisition, development, exploration, and production of oil and natural gas. The Debtors historic geographic focus has been along the onshore Gulf Coast area, primarily in Texas, Louisiana, and Mississippi. The Debtors operate a significant portfolio of oil and natural 2

3 Case KG Doc 90 Filed 07/31/15 Page 3 of 16 gas producing properties and mineral interests in this region and have expanded their footprint through the acquisition and development of additional producing or prospective properties in North Texas and Western Oklahoma. In addition, the Debtors own certain non-operated working interests in leases located on the Outer Continental Shelf in the Gulf of Mexico. The Debtors own an interest in approximately 4,690 oil and gas leases, substantially all of which are subject to or burdened by royalty interests, overriding royalty interests, third party working and nonworking interests, or a sub-set or combination thereof. 6. The events leading up to the Petition Date and the facts and circumstances supporting the relief requested herein are set forth in the First Day Declaration. 7. Prior to the Petition Date, the Debtors entered into a Restructuring Support Agreement with their first-lien secured lenders, certain holders of their second-lien secured notes (the Notes ), certain of their equity holders, and White Oak Resources VI, LLC ( White Oak ), pursuant to which the Debtors would seek to consummate a restructuring transaction under a chapter 11 plan. The proposed transaction would consist of the contribution of certain of the Debtors assets and the transfer of certain of the Debtors liabilities to White Oak in exchange for cash consideration and equity interests in White Oak pursuant to the terms of that certain Contribution Agreement by and among the Debtors and White Oak dated as of July 15, 2015 (the Contribution Agreement Transaction ). On July 22, 2015, the Debtors filed the Debtors Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code [D.I. 64] (the Plan ) 2 and related disclosure statement [D.I. 65]. The Plan contemplates the closing of the Contribution Agreement Transaction upon the occurrence of the Effective Date of the Plan. On the Effective Date, the Reorganized Debtor will receive the interests in White Oak issued under the 2 Capitalized terms used, but not otherwise defined in this section, have the meaning given to them in the Plan. 3

4 Case KG Doc 90 Filed 07/31/15 Page 4 of 16 Contribution Agreement Transaction, and the equity in the Reorganized Debtor will be issued to the holders of the Notes (including those holders participating in the Rights Offering and Backstop Commitment). Relief Requested 8. By this Application, under sections 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014, and Local Rules and (h), the Debtors request entry of an order (the Order ), substantially in the form attached hereto as Exhibit C, (i) authorizing the Debtors to employ and retain Balmoral Advisory, effective as of the Petition Date, to provide financial advisory and investment banking services during the Chapter 11 Cases, pursuant to and in accordance with the terms and conditions set forth in that certain engagement agreement, dated May 1, 2015 (the Engagement Agreement ), a copy of which is attached hereto as Exhibit B, and (ii) waiving certain of the informational requirements relating to Local Rule Balmoral Advisory s Qualifications 9. The Debtors have determined, in the exercise of their business judgment, that it is in the best interests of their estates to employ an investment banker and financial advisor to advise the Debtors with respect to their financial restructuring. The Debtors further believe that Balmoral Advisory is well qualified to provide its services to the Debtors in a cost-effective, efficient, and timely manner. Balmoral Advisory will coordinate with the other retained professionals in the Chapter 11 Cases to eliminate unnecessary duplication or overlap of work. Retaining such an advisor will enable the Debtors to carry out their duties in the Chapter 11 Cases and will assist in the reorganization of their estates. 4

5 Case KG Doc 90 Filed 07/31/15 Page 5 of Balmoral Advisory is well suited to provide the services the Debtors require. Balmoral Advisory provides corporate finance and financial advisory services to companies in financial distress. Balmoral Advisory is led by Skip Victor who has approximately 30 years of investment banking and restructuring experience. Mr. Victor was a Co-Founder and Managing Director of Chanin Capital Partners from 1990 until 2006 when the firm was acquired by Duff & Phelps Securities, LLC ( Duff & Phelps ). Chanin Capital Partners was consistently ranked as a leading investment banking firm specializing in corporate restructurings. Mr. Victor served as a Senior Managing Director and Senior Advisor specializing in restructurings at Duff & Phelps until April 2015 when he left to form Balmoral Advisory. Mr. Victor has worked on numerous restructurings including Signal International, Miraval Resort, Maui Land & Pineapple, Meridian Hotels, Nextel International, Pacific Gas & Electric, Regal Cinemas, Mirant, Silicon Graphics, Redback Networks, Orange County, CA, Satellite Mexicanos, Stations Casino, Home Interiors, Lake Las Vegas, Visteon, Westwood One, SpectraVision, Tricom, and many others. 11. The Debtors have selected Balmoral Advisory as their investment banker and financial advisor based upon, among other things, (i) the Debtors need to retain an investment banking and financial advisory firm to provide advice with respect to the Debtors restructuring, and (ii) the extensive experience and excellent reputation of Balmoral Advisory s professionals in providing investment banking and financial advisory services. Balmoral Advisory s Prepetition Services 12. On December 23, 2013, the Debtors engaged Duff & Phelps Securities, LLC ( Duff & Phelps ) to provide general investment banking and financial advice in connection with the Debtors attempts to complete a strategic restructuring, reorganization, and/or recapitalization of all or a significant portion of the Debtors outstanding indebtedness, as 5

6 Case KG Doc 90 Filed 07/31/15 Page 6 of 16 well as to prepare for the potential commencement of the Chapter 11 Cases (the Restructuring Services ). 13. On or about April 17, 2015, Mr. Victor, the Senior Advisor at Duff & Phelps who was primarily responsible for the Debtors engagement, left Duff & Phelps to form Balmoral Advisory. 14. As a result of Mr. Victor s departure from Duff & Phelps, the Debtors negotiated a complementary, cost-effective arrangement with Balmoral Advisory and Duff & Phelps that allowed the Debtors to retain the services of Mr. Victor while maintaining access to the resources and services of a large firm on an as needed basis. 3 As a result of Duff & Phelps reduced role in the Debtors restructuring, on April 26, 2015, the Debtors amended their engagement with Duffs & Phelps. The amended engagement provides that, in lieu of the Debtors paying Duff & Phelps a monthly fee of $125,000, beginning on May 1, 2015, the Debtors will pay Duff & Phelps standard hourly rate for services provided to the Debtors. The amended engagement also reduced the amount of the transaction fee owing to Duff & Phelps upon the closing of a Restructuring Transaction (as defined herein) from $1,000,000 (less up to three months of monthly fees) to $150, On May 1, 2015, the Debtors engaged Balmoral Advisory to provide Restructuring Services on the terms described herein. In rendering prepetition services to the Debtors in connection with these matters, Balmoral Advisory has worked closely with the Debtors management and other retained professionals and has become well-acquainted with the Debtors business operations and capital structure. Accordingly, Balmoral Advisory has developed significant expertise regarding the Debtors that will assist it in providing effective and 3 The Debtors have filed or will file a separate application to retain Duffs & Phelps. 6

7 Case KG Doc 90 Filed 07/31/15 Page 7 of 16 efficient services during the Chapter 11 Cases. Should the Court approve the Debtors retention of Balmoral Advisory, Balmoral Advisory will continue, without interruption, to perform the services for the Debtors as described herein. Services to Be Provided 16. As more fully described in the Engagement Agreement, the services to be provided by Balmoral Advisory in the Chapter 11 Cases include the following i. review and analyze the financial and operating statements of the Debtors; ii. iii. iv. develop tactics and strategies for negotiation with the Debtors stakeholders, including holders of the existing debt obligations and other liabilities; render financial advice and participate in meetings or negotiations with the Debtors stakeholders in connection with any Restructuring Transaction; 4 assist the Debtors in evaluation, structuring and negotiating the terms and conditions of any Restructuring Transaction; and v. provide the Debtors with other appropriate restructuring advice. 17. It is necessary for the Debtors efforts to maximize the value of their assets that the Debtors employ Balmoral Advisory to render the foregoing professional services. The Debtors believe that the services will not duplicate the services that other professionals will be providing the Debtors in these cases. Specifically, Balmoral Advisory will carry out unique functions and will use reasonable efforts to coordinate with the Debtors and other professionals retained in these cases to avoid the unnecessary duplication of services. 4 Restructuring Transaction means an recapitalization, refinancing, or restructuring of the Debtors equity, debt securities, other indebtedness, obligations or liabilities, that is achieved or effected through an exchange offer, tender, rescheduling of debt maturities, settlement or forgiveness of debt, conversion of debt and/or other liabilities, or sale or other transfer, directly or indirectly of equity, control, material assets, or other material interests of the Debtors whatsoever, whether in one or a series of transactions, acquisitions, mergers, or other business combinations or other similar transaction or series of transactions ether achieved outside of any court proceedings or pursuant to any state or federal court proceedings, including, but not limited to, through a chapter 11 plan of reorganization or sale pursuant to section 363 of the Bankruptcy Code. 7

8 Case KG Doc 90 Filed 07/31/15 Page 8 of 16 Professional Compensation 18. Prior to the commencement of the Chapter 11 Cases and under the terms of the Engagement Agreement, the Debtors paid Balmoral Advisory fees of $300,000 for services rendered. As more fully described in the Engagement Agreement, in consideration of the services provided by Balmoral Advisory, the Debtors have agreed to pay Balmoral Advisory during the Chapter 11 Cases the following fees i. Monthly Fee A nonrefundable cash fee of $100,000 ( Monthly Fee ). ii. Transaction Fee Concurrently with the closing of a Restructuring Transaction, Balmoral Advisory shall earn, and the Debtors shall pay to Balmoral Advisory, a cash fee (the Transaction Fee ) of $800, In addition to the Monthly Fee and the Transaction Fee, the Debtors also will, upon Balmoral Advisory s request and in accordance with applicable orders of the Court, reimburse Balmoral Advisory for its reasonable out-of-pocket expenses incurred from time to time in connection with its services to the Debtors. Balmoral Advisory bills its clients for its reasonable out-of-pocket expenses including, but not limited to (i) travel-related and certain other expenses, without regard to volume-based or similar credits or rebates Balmoral Advisory may receive from, or fixed fee arrangements made with, travel agents, airlines, or other vendors on a periodic basis, and (ii) research, database, and similar information charges paid to third party vendors, and postage, telecommunication, and duplicating expenses to perform clientrelated services that are not capable of being identified with, or charged to, a particular client or engagement in a reasonably practicable manner, based upon a uniformly applied monthly assessment or percentage of the fees due to Balmoral Advisory. 20. The Debtors believe that the compensation structure described above is (i) less than the compensation generally charged by leading investment banking and financial advisory firms for comparable engagements, both in and out of bankruptcy proceedings, and 8

9 Case KG Doc 90 Filed 07/31/15 Page 9 of 16 (ii) reflects a typical fee structure for Balmoral Advisory and other investment banking and financial advisory firms that do not bill their clients on an hourly basis, but are generally compensated on a transactional basis. 21. The hours worked, the results achieved, and the ultimate benefit to the Debtors of the work performed by Balmoral Advisory in connection with this engagement may vary and the Debtors have taken this into account in setting the above fees. 22. Balmoral Advisory s restructuring expertise, as well as its capital markets knowledge, financing skills, knowledge and experience, and acquisitions capabilities, some or all of which may be required by the Debtors during the term of Balmoral Advisory s engagement, were important factors to the Debtors in determining the amount of Balmoral Advisory s fees, and the Debtors believe that the ultimate benefit to the Debtors of Balmoral Advisory s services cannot be measured merely by reference to the number of hours to be expended by Balmoral Advisory s professionals in the performance of such services. 23. The Debtors propose that all compensation and expenses will be sought in accordance with 328(a) of the Bankruptcy Code and will not be subject to the standard of review in section 330 of the Bankruptcy Code. Modification of Compliance with Requirements Regarding Time Entry Detail 24. Consistent with its ordinary practice and the practice of investment bankers and financial advisors in other chapter 11 cases whose fee arrangements are typically not hours-based, Balmoral Advisory does not ordinarily maintain contemporaneous time records in one-tenth hour increments or provide or conform to a schedule of hourly rates for its professionals. Balmoral Advisory will maintain records in support of any actual, necessary costs and expenses incurred in connection with the rendering of its services in the Chapter 11 Cases. As Balmoral Advisory s compensation will be calculated and paid based on a fixed, deferred 9

10 Case KG Doc 90 Filed 07/31/15 Page 10 of 16 transaction fee (in addition to Monthly Fees), Balmoral Advisory requests that it not be required to file time records in accordance with Local Rule and the United States Trustee Fee Guidelines. Instead, notwithstanding that Balmoral Advisory does not charge for its services on an hourly basis, Balmoral Advisory will nonetheless maintain records (in summary format with 0.5 hour increments) of its services rendered for the Debtors, including descriptions of those services, the time expended in providing those services, and the individuals who provided those services, and will present such records together with its fee applications filed with the Court. Balmoral Advisory s Disinterestedness 25. To the best of the Debtors knowledge, (i) Balmoral Advisory is a disinterested person, as such term is defined in section 101(14) of the Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code, and, as required by section 327(a) and referenced by section 328(c) of the Bankruptcy Code, neither holds nor represents any interest adverse to the Debtors and their estates and (ii) except as disclosed in the Victor Declaration, has no connection to the Debtors or to their significant creditors or certain other potential parties-ininterest (collectively, the Interested Parties ) whose names were supplied to Balmoral Advisory by the Debtors Also, to the best of the Debtors knowledge, information, and belief, and based entirely and in reliance upon the Victor Declaration (i) to the best of Mr. Victor s knowledge, information, and belief, Balmoral Advisory has no engagement that would or does create an interest materially adverse to the interests of the Debtors, creditors, or equity security holders in the Chapter 11 Cases and, as such the Debtors believe that Balmoral Advisory is disinterested and holds no materially adverse interest as to the matters upon which it is to be 5 The list of Interested Parties supplied to Balmoral by the Debtors is attached as Annex 1 to the Victor Declaration. 10

11 Case KG Doc 90 Filed 07/31/15 Page 11 of 16 retained; and (ii) to the extent Balmoral Advisory discovers any facts bearing on the matters described herein during the period of Balmoral Advisory s retention, it will supplement the information contained in the Victor Declaration. 27. As described in more detail in the Victor Declaration, Balmoral Advisory, among other things, reviewed the list of Interested Parties to determine whether it represents, or has represented, certain of the Debtors creditors or other Interested Parties in these proceedings, and/or matters wholly unrelated to those proceedings. Balmoral Advisory has not provided any services to any of the Interested Parties. Due to the number of creditors and other parties in interest involved in these cases, however, Balmoral Advisory s personnel may have business associations with certain of the Debtors creditors or other Interested Parties in matters wholly unrelated to the Chapter 11 Cases. Except as may be described in the Victor Declaration, Balmoral Advisory does not, to its knowledge, represent any party with an interest materially adverse to the Debtors or their estates. 28. Also, in accordance with section 504 of the Bankruptcy Code, Balmoral Advisory has informed the Debtors that there is no agreement or understanding between Balmoral Advisory and any other entity, other than an employee of Balmoral Advisory, for the sharing of compensation received or to be received for services rendered in connection with the Chapter 11 Cases. Indemnification of Balmoral Advisory 29. Pursuant to the Engagement Agreement, the Debtors have agreed to (i) indemnify and hold harmless Balmoral Advisory and its affiliates and their respective past, present and future directors, officers, shareholders, partners, members, employees, agents, representatives, advisors, subcontractors and controlling persons (collectively, the Indemnified Persons ) to the fullest extent lawful, from and against any and all losses, claims, damages or 11

12 Case KG Doc 90 Filed 07/31/15 Page 12 of 16 liabilities (or actions in respect thereof), joint or several, arising out of or related to the retention of Balmoral Advisory by the Debtors and (ii) to reimburse each Indemnified Party for all reasonable expenses (including, without limitation, the fees and expenses of counsel) as they are incurred in connection with investigating, preparing, pursuing, defending, settling or compromising any action, suit, dispute, inquiry, investigation or proceeding, pending or threatened, brought by or against any person or entity (including, without limitation, any shareholder or derivative action), arising out of or relating to the engagement with the Debtors. 30. However, notwithstanding anything to the contrary in the Engagement Agreement or any agreements incorporated by reference in the Engagement Agreement, the Debtors agreement to indemnify and hold Balmoral Advisory harmless is modified as follows i ii Subject to the provisions of subparagraphs (ii) and (iii) below, the Debtors agree to indemnify Balmoral Advisory for any claims arising from, related to, or in connection with the services to be provided by Balmoral Advisory as specified in this Application, but not for any claim arising from, related to, or in connection with Balmoral Advisory s postpetition performance of any other services other than those in connection with the engagement, unless such postpetition services and indemnification therefor are approved by the Court; and The Debtors shall have no obligation to indemnify Balmoral Advisory for (a) any claim or expense that is judicially determined (the determination having become final) to have arisen from Balmoral Advisory s bad faith, self-dealing, breach of fiduciary duty (if any), willful misconduct, or gross negligence; (b) for a contractual dispute in which the Debtors allege the breach of Balmoral Advisory s contractual obligations if the Court determines that indemnification, contribution, or reimbursement would not be permissible pursuant to In re United Artists Theatre Company, 315 F.3d 217 (3d Cir. 2003); or (c) for any claim or expense that is settled prior to a judicial determination as to the exclusions set forth in clauses (a) and (b) above, but determined by the Court, after notice and a hearing pursuant to subparagraph (iii), below to be a claim or expense for which Balmoral Advisory should not receive indemnity, contribution, or reimbursement under the terms of the Engagement Agreement, as modified by the Order; and 12

13 Case KG Doc 90 Filed 07/31/15 Page 13 of 16 iii If, before the earlier of (a) the entry of an order confirming a chapter 11 plan in the Chapter 11 Cases (that order having become a final order no longer subject to appeal), and (b) the entry of an order closing the Chapter 11 Cases, Balmoral Advisory believes that it is entitled to the payment of any amounts by the Debtors on account of the Debtors indemnification obligations under this Application, including, without limitation, the advancement of defense costs, Balmoral Advisory must file an application in the Court, and the Debtors will not pay any such amounts to Balmoral Advisory until the entry of an order by the Court approving the payment. This subparagraph (iii) is intended only to specify the period of time under which the Court shall have jurisdiction over any request for fees and expenses by Balmoral Advisory for indemnification, and not as a provision limiting the duration of the Debtors obligation to indemnify Balmoral Advisory. 31. Notwithstanding any provisions in the Engagement Agreement to the contrary, the contribution obligations of the Indemnified Parties (as such term is defined in the Engagement Agreement) shall not be limited to the aggregate amount of fees actually received by Balmoral Advisory from the Debtors pursuant to the Engagement Agreement. Retention Pursuant to Section 328(a) of the Bankruptcy Code 32. The Debtors are seeking to retain Balmoral Advisory pursuant to section 328(a) of the Bankruptcy Code. Section 328(a) provides, in relevant part, that a debtor with the court s approval, may employ or authorize the employment of a professional person under section 327, on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis. 11 U.S.C. 328(a). Thus, section 328(a) of the Bankruptcy Code permits the Court to approve the terms of Balmoral Advisory s engagement as set forth in the Engagement Agreement. 33. The Debtors submit that the fee structure, expense reimbursements, and indemnification provisions are reasonable terms and conditions of employment under section 328(a) of the Bankruptcy Code in light of the following (i) the nature and scope of services to be provided by Balmoral Advisory; (ii) industry practice with respect to the fee structures and 13

14 Case KG Doc 90 Filed 07/31/15 Page 14 of 16 indemnification provisions typically utilized by leading financial advisory and investment banking firms that do not bill their clients on an hourly basis; (iii) market rates charged for comparable services both in and out of the chapter 11 context; (iv) Balmoral Advisory s substantial experience with respect to financial restructuring and investment banking; and (v) the nature and scope of work already performed by Balmoral Advisory prior to the Petition Date. 34. The terms of the Engagement Agreement were negotiated in good faith and at arm s length by the Debtors and Balmoral Advisory and reflect the Debtors evaluation of Balmoral Advisory s expertise and the extensive work that has been and will be performed. The Debtors acknowledge and agree that the fee structure was agreed upon by the parties in anticipation of a substantial professional commitment of time and effort by Balmoral Advisory and its professional staff under the Engagement Agreement, and in light of the fact that such commitment may foreclose other opportunities for Balmoral Advisory and its professional staff and that the actual time and commitment required of Balmoral Advisory and its professional staff to perform the services under the Engagement Agreement may vary substantially from week to week or month to month, creating peak load issues for the firm. 35. Furthermore, the fee structure is consistent with and typical of compensation arrangements entered into by Balmoral Advisory and other comparable firms in connection with the rendering of similar services under similar circumstances. Balmoral Advisory s strategic and financial expertise as well as its capital markets knowledge, financing skills, restructuring capabilities, and mergers and acquisitions expertise, some or all of which may be required by the Debtors during the term of Balmoral Advisory s engagement, were all important factors in determining the fee structure. The Debtors believe that the ultimate benefit of Balmoral Advisory s services cannot be measured by reference to the number of hours to be 14

15 Case KG Doc 90 Filed 07/31/15 Page 15 of 16 expended by Balmoral Advisory s professionals in the performance of such services. Accordingly, the Debtors submit that the fee structure is both fair and reasonable under the standards set forth in section 328(a) of the Bankruptcy Code. 36. The Debtors propose that, notwithstanding Balmoral Advisory s retention under section 328(a), the Office of the United States Trustee for the District of Delaware (the U.S. Trustee ) will retain the right to object to the compensation to be paid to Balmoral Advisory pursuant to the Engagement Agreement based on the reasonableness standard provided for in section 330 of the Bankruptcy Code, provided that reasonableness for this purpose shall include, among other things, an evaluation by comparing the fees payable in this instance to the fees paid to other investment banking and financial advisory firms for comparable services in other chapter 11 cases and outside of chapter 11 cases, and shall not be evaluated primarily on the basis of time committed or the length of the Chapter 11 Cases. 37. As set forth above, notwithstanding approval of the Engagement Agreement under section 328(a) of the Bankruptcy Code, Balmoral Advisory intends to apply for compensation for professional services rendered and reimbursement of expenses incurred in connection with the Chapter 11 Cases consistent with the fee structure set forth in the Engagement Agreement, subject to the Court s approval and in compliance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any other applicable procedures and orders of the Court. Notice 38. Notice of this Application will be provided to (i) the U.S. Trustee; (ii) counsel to TPG Specialty Lending, Inc., the administrative agent under the Debtors prepetition secured credit facility and DIP Lender; (iii) counsel to certain Initial Consenting 15

16 Case KG Doc 90 Filed 07/31/15 Page 16 of 16

17 Case KG Doc 90-1 Filed 07/31/15 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re MILAGRO HOLDINGS, LLC, et al., Debtors x Chapter 11 Case No (KG) Jointly Administered Hearing Date August 21, 2015, at 1100 a.m. (ET) Objection Deadline August 14, 2015, at 400 p.m. (ET) WAIVER OF LOCAL RULE REQUESTED NOTICE OF DEBTORS APPLICATION TO RETAIN BALMORAL ADVISORY SERVICES LLC AS FINANCIAL AND INVESTMENT BANKER FOR THE DEBTORS, EFFECTIVE AS OF THE PETITION DATE TO NOTICE OF THIS APPLICATION WILL BE PROVIDED TO (I) THE U.S. TRUSTEE; (II) COUNSEL TO TPG SPECIALTY LENDING, INC., THE ADMINISTRATIVE AGENT UNDER THE DEBTORS PRE-PETITION SECURED CREDIT FACILITY AND DIP LENDER; (III) COUNSEL TO CERTAIN INITIAL CONSENTING NOTEHOLDERS; (IV) THOSE PARTIES LISTED ON THE LIST OF CREDITORS HOLDING THE THIRTY (30) LARGEST UNSECURED CLAIMS AGAINST THE DEBTORS (ON A CONSOLIDATED BASIS), AS IDENTIFIED IN THEIR CHAPTER 11 PETITIONS; (V) COUNSEL TO THE INITIAL EQUITY HOLDERS; (VI) COUNSEL TO THE SECOND LIEN NOTES TRUSTEE; (VII) COUNSEL TO WHITE OAK; AND (VIII) THOSE PARTIES WHO HAVE FORMALLY FILED REQUESTS FOR NOTICE IN THE CHAPTER 11 CASES UNDER BANKRUPTCY RULE PLEASE TAKE NOTICE that the debtors and debtors-in-possession in the above-captioned cases (collectively, the Debtors ) have filed the attached Debtors Application to Retain Balmoral Advisory Services LLC as Financial and Investment Banker for the Debtors, Effective as of the Petition Date (the Application ). PLEASE TAKE FURTHER NOTICE that any objections to the Application must be filed on or before August 14, 2015, at 400 p.m. (ET) (the Objection Deadline ) with the United States Bankruptcy Court for the District of Delaware, 3rd Floor, 824 Market Street, Wilmington, Delaware At the same time, you must serve a copy of any objection upon The Debtors in these cases, along with the last four digits of each Debtor s federal tax identification number, are Milagro Holdings, LLC (7232); Milagro Oil & Gas, Inc. (7173); Milagro Exploration, LLC (9260); Milagro Producing, LLC (9330); Milagro Mid-Continent, LLC (8804); and Milagro Resources, LLC (6134). The Debtors mailing address is 1301 McKinney Street, Suite 500, Houston, Texas

18 Case KG Doc 90-1 Filed 07/31/15 Page 2 of 2 the undersigned proposed Co-Counsel and Special Counsel to the Debtors so as to be received on or before the Objection Deadline. PLEASE TAKE FURTHER NOTICE THAT A HEARING ON THE APPLICATION WILL BE HELD ON AUGUST 21, 2015, AT 1100 A.M. (ET) BEFORE THE HONORABLE KEVIN GROSS IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, 824 N. MARKET STREET, 6 th FLOOR, COURTROOM NO. 3, WILMINGTON, DELAWARE PLEASE TAKE FURTHER NOTICE THAT, IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED IN THE APPLICATION WITHOUT FURTHER NOTICE OR A HEARING. Dated July 31, 2015 Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Ryan M. Bartley M. Blake Cleary (No. 3614) Joel A. Waite (No. 2925) Ryan M. Bartley (No. 4985) Ian J. Bambrick (No. 5455) 1000 N. King Street Rodney Square Wilmington, Delaware Telephone (302) Facsimile (302) and- John F. Higgins Eric M. English PORTER HEDGES LLP 1000 Main Street, 36th Floor Houston, TX Telephone (713) Facsimile (713) Proposed Counsel for the Debtors and Debtors in Possession

19 Case KG Doc 90-2 Filed 07/31/15 Page 1 of 26 EXHIBIT A Victor Declaration

20 Case KG Doc 90-2 Filed 07/31/15 Page 2 of 26 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re MILAGRO HOLDINGS, LLC, et al., Debtors x Chapter 11 Case No (KG) Jointly Administered DECLARATION OF SKIP VICTOR IN SUPPORT OF THE DEBTORS APPLICATION TO RETAIN BALMORAL ADVISORY SERVICES LLC AS FINANCIAL ADVISOR AND INVESTMENT BANKER FOR THE DEBTORS, EFFECTIVE AS OF THE PETITION DATE I, Skip Victor, declare under penalty of perjury as follows 1. I am a Managing Director of Balmoral Advisory Services LLC ( Balmoral Advisory ), and am duly authorized to make this Declaration on behalf of Balmoral Advisory. I submit this Declaration in support of the application (the Application ) 2 of the Debtors for an order authorizing the employment and retention of Balmoral Advisory as financial advisor and investment banker to the Debtors, effective as of the Petition Date, pursuant to sections 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014, and Local Rules and (h). Except as otherwise noted, I have personal knowledge of the matters set forth herein and, if called as a witness, I could and would testify thereto. 2. This Declaration is also submitted as the statement required pursuant to sections 328(a) of the Bankruptcy Code, and Rule 2014(a) of the Bankruptcy Rules. 1 2 The Debtors in these cases, along with the last four digits of each Debtor s federal tax identification number, are Milagro Holdings, LLC (7232); Milagro Oil & Gas, Inc. (7173); Milagro Exploration, LLC (9260); Milagro Producing, LLC (9330); Milagro Mid-Continent, LLC (8804); and Milagro Resources, LLC (6134). The Debtors mailing address is 1301 McKinney Street, Suite 500, Houston, Texas Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Application.

21 Case KG Doc 90-2 Filed 07/31/15 Page 3 of 26 Balmoral Advisory s Qualifications 3. Balmoral Advisory is well suited to provide the services that the Debtors require. Balmoral Advisory provides corporate finance and financial advisory services to companies in financial distress. 4. I have approximately 30 years of investment banking and restructuring experience and founded Balmoral Advisory in April From 1985 to 1990, I held a series of positions at Drexel Burnham Lambert, culminating in my appointment as a Vice President. In 1990, I co-founded Chanin Capital Partners, a boutique investment banking firm specializing in corporate restructurings. In 2005, I co-founded Balmoral Funds LLC, a private equity firm specializing in special situations, where I remain a managing director and member of the investment committee. In October 2006, Chanin Capital Partners was sold to Duff & Phelps. I served as a Senior Managing Director of Duff & Phelps and Co-Head of the Restructuring Group until 2013 when I became a Senior Advisor. In April 2015, I left Duff & Phelps to form Balmoral Advisory. Balmoral Advisory s Prepetition Services 5. On December 23, 2013, the Debtors engaged Duff & Phelps to provide general investment banking and financial advice in connection with the Debtors attempts to complete a strategic restructuring, reorganization, and/or recapitalization of all or a significant portion of the Debtors outstanding indebtedness as well as to prepare for the potential commencement of the Chapter 11 Cases (the Restructuring Services ). 6. Prior to leaving Duff & Phelps, I was the Senior Advisor primarily responsible for the Debtors engagement with Duff and Phelps. 2

22 Case KG Doc 90-2 Filed 07/31/15 Page 4 of On May 1, 2015, the Debtors engaged Balmoral Advisory to provide Restructuring Services on the terms described herein. On April 26, 2015, the Debtors amended their engagement with Duffs & Phelps to provide that, in lieu of the Debtors paying Duff & Phelps a monthly fee of $125,000, beginning on May 1, 2015, the Debtors would pay Duff & Phelps at the firm s standard hourly rate for services provided to the Debtors. The amended engagement also reduced the amount of the transaction fee owing to Duff & Phelps upon the closing of a Restructuring Transaction (as defined herein) from $1,000,000 (less up to three months of monthly fees) to $150,000. The amended engagement with Duff & Phelps provides the Debtors and Balmoral Advisory with access to the resources and services of large firm, including professionals already familiar with the Debtors business. 8. In rendering prepetition services to the Debtors in connection with these matters, Balmoral Advisory has worked closely with the Debtors management and other retained professionals and has become well-acquainted with the Debtors business operations and capital structure. Accordingly, Balmoral Advisory has developed significant expertise regarding the Debtors that will assist Balmoral Advisory in providing effective and efficient services during the Chapter 11 Cases. Should the Court approve the Debtors retention of Balmoral Advisory as investment banker and financial advisor, Balmoral Advisory will continue, without interruption, to perform the services for the Debtors as described herein. Services to Be Provided 3 9. As more fully described in the Engagement Agreement, the services to be provided by Balmoral Advisory in the Chapter 11 Cases include the following 3 In the event of any conflict between the summary of services and fees contained herein and the terms or conditions of the Engagement Letter and the Order, the terms and conditions of the Engagement Letter and Order shall control. 3

23 Case KG Doc 90-2 Filed 07/31/15 Page 5 of 26 i. review and analyze the financial and operating statements of the Debtors; ii. iii. iv. develop tactics and strategies for negotiation with the Debtors stakeholders, including holders of the existing debt obligations and other liabilities; render financial advice and participate in meetings or negotiations with the Debtors stakeholders in connection with any Restructuring Transaction; assist the Debtors in evaluation, structuring and negotiating the terms and conditions of any Restructuring Transaction; and v. provide the Debtors with other appropriate restructuring advice. 10. Balmoral Advisory will carry out unique functions and will use reasonable efforts to coordinate with the Debtors and other professionals retained in the Chapter 11 Cases to avoid the unnecessary duplication of services. Professional Compensation 11. Prior to the commencement of the Chapter 11 Cases and under the terms of the Engagement Agreement, the Debtors paid Balmoral Advisory fees of $300,000 for services rendered. As more fully described in the Engagement Agreement, in consideration of the services provided by Balmoral Advisory, the Debtors have agreed to pay Balmoral Advisory during the Chapter 11 Cases the following fees i. Monthly Fee A nonrefundable cash fee of $100,000 ( Monthly Fee ). ii. Transaction Fee Concurrently with the closing of a Restructuring Transaction, Balmoral Advisory shall earn, and the Debtors shall pay to Balmoral Advisory, a cash fee (the Transaction Fee ) of $800, In addition to the Monthly Fee and the Transaction Fee, the Debtors also will, upon Balmoral Advisory s request and in accordance with applicable orders of the Court, reimburse Balmoral Advisory for its reasonable out-of-pocket expenses incurred from time to time in connection with its services to the Debtors. Balmoral Advisory bills its clients for its reasonable out-of-pocket expenses including, but not limited to (i) travel-related and certain 4

24 Case KG Doc 90-2 Filed 07/31/15 Page 6 of 26 other expenses, without regard to volume-based or similar credits or rebates Balmoral Advisory may receive from, or fixed fee arrangements made with, travel agents, airlines, or other vendors on a periodic basis, and (ii) research, database, and similar information charges paid to third party vendors, and postage, telecommunication, and duplicating expenses to perform clientrelated services that are not capable of being identified with, or charged to, a particular client or engagement in a reasonably practicable manner, based upon a uniformly applied monthly assessment or percentage of the fees due to Balmoral Advisory. Balmoral Advisory s Disinterestedness 13. In connection with Balmoral Advisory s proposed employment and retention by the Debtors and the preparation of this Declaration, Balmoral Advisory undertook a conflicts analysis to determine its relationship with potential parties in interest in the Chapter 11 Cases (individually, an Interested Party and, collectively, the Interested Parties ) that were identified to Balmoral Advisory by the Debtors and which are listed on Annex 1 hereto. 14. Based on the search conducted and described above, to the best of my knowledge, neither I nor Balmoral Advisory, insofar as I have been able to ascertain, has any connection with the Debtors or any other Interested Party except as stated herein. i. Prior to the commencement of the Chapter 11 Cases, Balmoral Advisory rendered prepetition services to the Debtors in accordance with the Engagement Agreement. Balmoral Advisory has not provided any services to any party involved in the Chapter 11 Cases other than the Debtors. ii. Balmoral Advisory and/or I may have business associations with certain creditors of the Debtors or counsel or other professionals involved in the Chapter 11 Cases on matters unrelated to the Chapter 11 Cases. In addition, in the ordinary course of its business, Balmoral Advisory may engage counsel or other professionals in unrelated matters who now represent, or in the future may represent, creditors or other interested parties in the chapter 11 cases. To the best of my knowledge and information, none of these business relationships represents an interest materially adverse to the Debtors herein in matters upon which Balmoral Advisory is to be engaged. 5

25 Case KG Doc 90-2 Filed 07/31/15 Page 7 of In addition, to the best of my knowledge, information, and belief and in accordance with Bankruptcy Rule 5002, neither I nor any professional at Balmoral Advisory is a relative of the United States Bankruptcy Judge assigned to the Chapter 11 Cases, and Balmoral Advisory does not have a connection with the United States Bankruptcy Judge that would render the firm s retention in the Chapter 11 Cases improper. Further, in accordance with Bankruptcy Rule 2014, Balmoral Advisory does not have any connection with the U.S. Trustee or any persons employed by the U.S. Trustee. 16. Balmoral Advisory is a disinterested person as that term is defined in section 101(14) of the Bankruptcy Code in that Balmoral Advisory and its professionals i. are not creditors, equity security holders, or insiders of the Debtors; ii. iii. are not and were not, within two (2) years before the date of the filing of the petition, a director, officer, or employee of the Debtors; and do not have an interest materially adverse to the interest of the Debtors estates or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the Debtors, or for any other reason. 17. As set forth above, and subject to any explanations and/or exceptions contained therein or herein, Balmoral Advisory (i) does not hold or represent any interest adverse to the Debtors in connection with the matters upon which Balmoral Advisory is to be engaged and (ii) is disinterested 18. To the extent Balmoral Advisory discovers any facts bearing on the matters described herein during the period of Balmoral Advisory s retention, Balmoral Advisory undertakes to amend and supplement the information contained in this Declaration to disclose such facts. 19. No agreement or understanding presently exists to share with any other person or firm any compensation received by Balmoral Advisory for its services in the Chapter 6

26 Case KG Doc 90-2 Filed 07/31/15 Page 8 of Cases. If any such agreement is entered into, Balmoral Advisory undertakes to amend and supplement this Declaration to disclose the terms of any such agreement. Indemnification of Balmoral Advisory 20. Among other things, the Engagement Agreement provides that the Debtors shall indemnify Balmoral Advisory against any and all losses, claims, damages, or liabilities to which Balmoral Advisory may become subject in connection with services provided pursuant to the Engagement Agreement. The Debtors shall pay Balmoral Advisory s fees and expenses, including counsel fees, as they are incurred in defending any such claim; provided, however, that where it has been determined in a final judgment by a court of competent jurisdiction that the claim resulted from the gross negligence, bad faith or willful misconduct of Balmoral Advisory, Balmoral Advisory shall repay the Debtors for any fees and expenses advanced by the Debtors pursuant to the preceding sentence. However, consistent with previous understandings and agreements with the U.S. Trustee, Balmoral Advisory has proposed to modify its indemnification provisions in the Engagement Agreement to those outlined in the proposed Order. Compliance with the Bankruptcy Code and Bankruptcy Rules 21. I am generally familiar with the Bankruptcy Code and the Bankruptcy Rules, and Balmoral Advisory will comply with them, subject to the Orders of the Court. 7

27 Case KG Doc 90-2 Filed 07/31/15 Page 9 of 26 I declare under penalty of perjury that the foregoing is true and correct. Executed on this 31 st day of July /s/ Skip Victor Skip Victor Managing Director Balmoral Advisory Services 8

28 Case KG Doc 90-2 Filed 07/31/15 Page 10 of 26 Annex 1 to Exhibit A List of Potential Parties in Interest

29 Case KG Doc 90-2 Filed 07/31/15 Page 11 of 26 DEBTORS MILAGRO OIL & GAS INC. (F/K/A MILAGRO MEZZ LLC) MILAGRO EXPLORATION LLC MILAGRO PRODUCING LLC MILAGRO RESOURCES LLC MILAGRO MID-CONTINENT LLC MILAGRO HOLDINGS LLC MILAGRO EXPLORATION II, LLC MILAGRO OPERATING, LLC MILAGRO PROPERTIES, LLC DIRECTORS AND OFFICERS JONATHAN GINNS MO BAWA TOM HAUSER ADAM COHN GARY A. MABIE SHAREHOLDERS ACON-BASTION PARTNERS II, LP ACON-BASTION PARTNERS II, OFFSHORE LP ACON MILAGRO INVESTORS, LLC MILAGRO INVESTORS, LLC (GUGGENHEIM) WEST COAST MILAGRO PARTNERS, LLC FS INVESTMENTS (ACQUIRED PLAINFIELD INTEREST 2011) MILAGRO FOUNDERS' GROUP, LP MILAGRO FOUNDERS' GROUP II, LP MILAGRO EXPLORATION GP, LLC ROBERT L. CAVNAR MILAGRO MANAGEMENT POOL I, LP ABP II MILAGRO AIV, LP ACON MILAGRO SECOND LIEN INVESTORS, LLC 1888 FUND, LTD. ACON MILAGRO SECOND LIEN INVESTORS, LLC AIG PEP IV CO-INVESTMENT, LP AIG VENTURE CAPITAL, LP COPPER RIVER CLO LTD. GREEN LANE CLO LTD. GUGGENHEIM ENERGY OPPORTUNITIES FUND, LP KENNECOTT FUNDING LTD. NZC GUGGENHEIM MASTER FUND LIMITED GSO CAPITAL (ACQUIRED IN 2011) SANDS POINT FUNDING LTD. TOURADJI DIVERSIFIED HOLDINGS, LLC TOURADJI DIVERSIFIED HOLDINGS, LTD. TOURADJI GLOBAL RESOURCES HOLDINGS, LLC TOURADJI GLOBAL RESOURCES HOLDINGS, LTD. NEW ENERGY LLC - AUGUST 2010 JEFFREY GREEN - DECEMBER 29, 2014 RALPH FINERMAN - DECEMBER 29, 2014 GUGGENHEIM ENERGY OPPORTUNITIES FUND, LP

30 Case KG Doc 90-2 Filed 07/31/15 Page 12 of 26 KENNECOTT FUNDING LTD IN-FP1, LLC WEST COAST ENERGY PARTNERS LLC PLAINFIELD DIRECT INC TOURADJI DIVERSIFIED HOLDINGS, LLC TOURADJI DIVERSIFIED HOLDINGS, LTD TOURADJI GLOBAL RESOURCES HOLDINGS, LLC TOURADJI GLOBAL RESOURCES HOLDINGS, LTD BONDHOLDERS SANKATY WAMCO CREDIT SUISSE GUGGENHEIM PUTNAM KAMUNTING STREET SILVER ROCK MORGAN STANLEY LENDERS TPG SPECIALITY LENDING, INC. TPG SL SPV, LLC LAUREN AND JOHN ARNOLD FOUNDATION CERBERUS OFFSHORE LEVERED LOAN OPPORTUNITIES MASTER FUND II, L.P. CERBERUS ASRS HOLDINGS, LLC CERBERUS AUS LEVERED HOLDINGS LP CERBERUS ICQ LEVERED LOAN OPPORTUNITIES FUND, L.P. CERBERUS LEVERED LOAN OPPORTUNITIES FUND II L.P. CERBERUS NJ CREDIT OPPORTUNITIES FUND, L.P. CERBERUS SWC LEVERED LOAN OPPORTUNITIES MASTER FUND, L.P. CERBERUS KRS LEVERED LOAN OPPORTUNITIES FUND, L.P. CERBERUS AUS LEVERED II LP CERBERUS ICQ LEVERED LLC CERBERUS ONSHORE II CLO-2 LLC CERBERUS SWC LEVERED LP GOLDMAN SACHS SPECIALITY LENDING HOLDINGS, INC PURCHASER WHITE OAK RESOURCES VI, LLC

31 Case KG Doc 90-2 Filed 07/31/15 Page 13 of 26 LANDLORDS 301 BUILDING, LLC BRIDGEPORT 380 CENTER LLC CRESENT 1301 MCKINNEY, L.P. (LANDLORD) FIRST MCALLEN INDUSTRIAL, LTD JP CARPENTER O'CONNOR BUILDING PARTNERS, L. P. TAXING AUTHORITIES ALABAMA DEPARTMENT OF REVENUE ALABAMA DEPT OF REVENUE ALABAMA OFFICE OF THE STATE ASSUMPTION PARISH BARBERS HILL ISD BEE COUNTY TAX A/C BRAZORIA COUNTY CLERK OFFICE BRAZORIA COUNTY TAX BRAZOS COUNTY CLERK BROOKS COUNTY TAX A/C CALHOUN CAD TAX A/C CAMERON PARISH TAX COLLECTOR CHAMBERS COUNTY TAX AC CITY OF DAYTON CITY OF LIBERTY CLERK OF COURT COLORADO COUNTY CENTRAL COLORADO COUNTY CLERK COMPTROLLER OF PUBLIC ACCOUNTS CYPRESS FAIRBANKS ISD DAYTON ISD TAX OFFICE DELAWARE SECRETARY OF STATE DEPARTMENT OF REVENUE DEPARTMENT OF THE TREASURY DEWITT COUNTY GALVESTON COUNTY TAX ASSESSOR GOLIAD COUNTY CLERK GOLIAD COUNTY TAX A/C GOLIAD ISD TAX A/C GRANT THORNTON LLP GRIMES COUNTY APPRAISAL DISTRICT HARDIN COUNTY HARRIS COUNTY HARRIS COUNTY CLERK HIDALGO COUNTY TAX A/C HUMBLE ISD JACK CAD TAX A/C JACK COUNTY TAX A/C JACKSON COUNTY TAX

32 Case KG Doc 90-2 Filed 07/31/15 Page 14 of 26 JASPER COUNTY TAX ASSESSOR JEFFERSON COUNTY CLERK JEFFERSON COUNTY TAX OFFICE KARNES COUNTY KARPER COMPANY KE ANDREWS & CO KENEDY COUNTY KRISTEEN ROE, BRAZOS COUNTY TAX A/C L. VERNON BOURGEOIS, JR. TAC LAFAYETTE CONSOLIDATED GOVT LAFAYETTE PARISH TAX COLLECTOR LAFOURCHE PARISH LAVACA COUNTY TAX A/C LEE COUNTY TAX A/C LIBERTY COUNTY LIBERTY COUNTY TAX A/C LISKOW & LEWIS, APLC LIVE OAK CAD TAX A/C LOUISIANA DEPT OF REVENUE MARION COUNTY TAX COLLECTOR MATAGORDA CO. TAX A/C MATAGORDA COUNTY CLERK MCGRIFF SEIBELS & WILLIAMS INC MCMULLEN COUNTY TAX A/C MISSISSIPPI STATE TAX COM MISSISSIPPI STATE TAX COMMISSION NUECES COUNTY TAX A/C OFFICE OF THE MISSISSIPPI OKLAHOMA TAX COMMISSION PALACIOS ISD TAX OFFICE PARISH OF ST. MARY PLAQUEMINES PARISH TAX COL RIO GRANDE CITY C.I.S.D. ROMA ISD TAX A/C SAN ISIDRO ISD TAX A/C SAN PATRICIO COUNTY SHELDON I.S.D. TAX OFFICE ST MARY PARISH LOUISIANA ST. MARTIN PARISH ST. MARTIN PARISH STARR COUNTY CLERK STARR COUNTY TAX A/C STATE COMPTROLLER STATE OF DELAWARE STATE OF LOUISIANA-DEPT OF REV STATE OF TEXAS COMPTROLLER UNITED STATES TREASURY VERMILION PARISH - COURT CLERK VERMILION PARISH SHERIFF VICTORIA COUNTY TAX A/C WASHINGTON PARISH

33 Case KG Doc 90-2 Filed 07/31/15 Page 15 of 26 WHARTON COUNTY CLERK WHARTON COUNTY TAX A/C WISE CO APP DIST TAX A/C WISE COUNTY TAX A/C YOAKUM ISD ZAPATA COUNTY TAX A/C UTILITIES ALL PHASE ELECTRICAL SVC, INC AMCI AT&T BEAUREGARD ELECTRIC CO OP,INC BRYAN TEXAS UTILITIES CENTURY LINK CHAMPION ENERGY SERVICES, LLC CITY OF BRIDGEPORT CITY OF DAYTON CITY OF LIBERTY CITY OF RUNAWAY BAY COGENT COMMUNICATIONS COMCAST DIRECT TV ENTERGY GULF COAST BROADBAND HARRIS CAPROCK COMMINUCATIONS IMPROVE WATER ASSOCIATION JEFF DAVIS ELECTRIC CO-OP, INC. KARNES ELECTRIC COOPERATIVE MAGIC VALLEY ELECTRIC CO-OP MCALLEN PUBLIC UTILITY MERIPLEX COMMUNICATIONS, LTD NORTHWESTERN ELECTRIC COOPERATIVE, INC. PEARL RIVER VALLEY ELECTRIC POWER ASSOC SAN BERNARD ELECTRIC CO-OP INC SAN PATRICIO ELECTRIC SENTRY TECHNOLOGIES INC SLEMCO SPRINT STARBAND COMMUNICATIONS INC STARBAND COMMUNICATIONS INC TIME WARNER TELECOM VALLEY TELEPHONE CO OP, INC. VERIZON BUSINESS SERVICES INC VERIZON SOUTHWEST INC VERMILION PARISH POLICE JURY VICTORIA ELECTRIC COOPERATIVE WISE ELECTRIC COOPERATIVE INC ZAYO GROUP, LLC INSURERS ARCH INSURANCE COMPANY

34 Case KG Doc 90-2 Filed 07/31/15 Page 16 of 26 ARGO GROUP US BERKLEY REGIONAL INSURANCE COMPANY CATLIN INSURANCE COMPANY CONTINENTAL INSURANCE COMPANY FEDERAL INSURANCE COMPANY GEMINI INSURANCE COMPANY GREAT AMERICAN HANOVER INSURANCE COMPANY IRONSHORE SPECIALITY INSURANCE COMPANY MARKEL AMERICAN INSURANCE COMPANY NATIONAL LIABILITY & FIRE INSURANCE CO (BERKSHIRE) QBE INSURANCE CORPORATION RSUI INDEMNITY COMPANY TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA VARIOUS LLOYD'S SYNDICATES & CERTAIN INSURANCE COMPANIES SIGNIFICANT CREDITORS A&B VALVE & PIPING SYSTEMS A&T WELL SERVICE, INC. A2D TECHNOLOGIES INC ABM PARKING SERVICES ABRAXAS PETROLEUM CORPORATION ACADIANA EQUIPMENT RENTALS ACADIANA'S OFFICE PRODUCTS ACME TRUCK LINE INC ACTION PRODUCTION SERVICES LLC ADDISON GROUP ADVANCED FIRE & SAFETY LLC ADVISIAN, INC. AIR EXCHANGE, LLC ALAYNE K. MOONEY EXECUTRIX FOR ALFORD LP GAS INC ALL PHASE ELECTRICAL SVC, INC. AMBIUS, LLC AMCI AMERICAN EXPRESS AMERICO ENERGY RESOURCES ANDERSON MEASUREMENT & ANNIE KIMICH COOPER ANSWER INC APACHE CORPORATION A-PLUS FIRST AID & SAFETY INC ARAMARK REFRESHMENT SERVICES ARNOLD OIL COMPANY ASG SECURITY ATHENA CONSTRUCTION LLC AWP OPERATING COMPANY AXIA RESOURCES LP AXIP ENERGY SERVICES, LP B & B PUMP & EQUIPMENT BALMORAL ADVISORY SERVICES,

35 Case KG Doc 90-2 Filed 07/31/15 Page 17 of 26 BARNEY F. KOGEN TRUSTEE OF THE BAROID FLUID SERVICES BASIC ENERGY SERVICES, LP BATCHELOR RISK MANAGMENT BEACON SUPPLY COMPANY INC BEAUREGARD ELECTRIC COOP,INC BENCHMARK ENERGY TRANSPORT BENOIT PREMIUM THREADING, LLC BESTEST, INC. BGMI BHL BORESIGHT LLC BIG K KANS INC BKB OILFILED, INC. BLAKE A CLARK BORETS US, INC. BRANDON D CLARK BREAUX & DAIGLE MARINE, INC. BRIDGEPORT 380 CENTER, LLC BRIDGEPORT PUMP & SUPPLY INC. BRIDGEPORT TANK TRUCKS, LLC BROTHERS VACUUM & TRUCKING BRYAN FRANCIS ENERGY SERVICES BRYAN PETRZELKA BRYAN TEXAS UTILITIES BUD GRIFFIN CUSTOMER BURTON C BOWEN BUSS MECHANICAL SERVICES LLC C & D PRODUCTION SPECIALIST C & E OPERATING INC C&L VACUUM SERVICE LLC CANTERA OPERATING, LLC CARL GUNGOLL EXPLORATION LLC CARWASH CARWASH CASSITY FOUNDATION DRILLING, CASTEX ENERGY INC CDM RESOURCE MANAGEMENT LLC CENTURY GRAPHICS & SIGN INC CENTURYLINK CENTURYLINK (FORMERLY QWEST) CF & S TANK AND EQUIPMENT CO. CF&S TANK & EQUIPMENT CO. CGG SERVICES (US), INC. CHAMPION ENERGY SERVICES, LLC CHARLES HOLSTON, INC. CHEM SPRAY SOUTH INC CHEMICAL WEED CONTROL, INC. CHEMSYNC CHEM-TECH CO INC CHESAPEAKE OPERATING, INC. CHICO COFFMAN TANK TRUCKS, INC CHURCHWELL ENVIROMENTAL CO.

36 Case KG Doc 90-2 Filed 07/31/15 Page 18 of 26 CIMAREX ENERGY CO CINCH ENERGY SERVICES, LLC CITY OF BRIDGEPORT CITY OF LIBERTY CITY OF RUNAWAY BAY CLAYTON DIRECTIONAL COASTAL CHEMICAL CO., L.L.C. COASTAL FLOW ENERGY LABS INC COASTAL FLOW FIELD COASTAL FLOW GAS COGENT COMMUNICATIONS INC COMCAST COMMERCIAL CLEANING SERVICES COMMUNITY COFFEE CO LLC CORPORATION SERVICE COMPANY CR72 SERVICES, LLC CRAIN BROTHERS, INC. CREDENCE SERVICES INC CRESCENT 1301 MCKINNEY LP CROSS ROADS OILFIELD D & D VACUUM SERVICE DARWYN AND WAYNELL DUDERSTADT DATA FOUNDRY INC DAVID MURRAY DAYTON LEASE & PIPELINE DCP MIDSTREAM DEBORAH LEE WAGNER DELL MARKETING LP DEVON ENERGY PRODUCTION CO, LP DEWBRE PETROLEUM CORPORATION DIAMOND S ENERGY COMPANY DIRECTV DISHMAN & BENNETT SPECIALTY CO DIXIE ELECTRIC, INC. D-JAX CORPORATION DM HOFFPAUIR GAUGING DNOW L. P. DOS HERMANAS TRUST DRU-CHEM, INC. DUAL TRUCKING INC DUNCAN OILFIELD CONSTRUCTION DWIGHT NEITCH E&R VACUUM TRUCK SERVICE, LLC EAGLE SOFTWARE EATON OIL TOOLS, INC ECOSERV, LLC EDWARD HEARD WICKER EDWARD OIL CO EL FARMER AND COMPANY ELITE TOILET RENTAL ELIZABETH ELLEN PETERS

37 Case KG Doc 90-2 Filed 07/31/15 Page 19 of 26 ELLIOTT ELECTRIC SUPPLY ELLIS G SMITH EMINENT OIL TOOLS, LLC EMS USA INC ENERGY FISHING ENERGY FISHING & ENERGY GAS COMPRESSION LTD ENERGY PRODUCTION CORPORATION ENERQUEST OIL & GAS ENERTAX CONSULTANTS LP ENERVEST OPERATING LLC ENTERGY EOG RESOURCES, INC. ES&H CONSULTING & TRAINING ES&H CONSULTING SERVICES, INC. ESSENTIAL OFFICE SOLUTIONS INC EUGENE P. CELLA EXCALIBUR VENTURES INC EXPLORATION LAND SERVICES LLC EXTERRAN ENERGY SOLUTIONS LP FASCLAMPITT HOUSTON SOUTHWEST FASTSIGNS FEDEX FESCO, LTD FIELDWOOD ENERGY LLC FIRST MCALLEN INDUSTRIAL, LTD FOOTE FARM, LLC FOREFRONT EMERGENCY MANAGEMENT FRANK H LICHTENSTEIN JR SP FRANKS CASING CREW AND RENTAL FREEPORT-MCMORAN OIL & GAS LLC G & L WELL SERVICE, INC. GAS MEASUREMENT SERVICES, INC. GAUBERT OIL CO INC GE OIL & GAS PRESSURE CONTROL GENCO ENERGY SERVICES, INC. GENERAL DATATECH, L.P. G-G VALVE & SUPPLY, INC. GIBSON LIFT TRUCK GLOBAL HUNTER SECURITIES, LLC GLOBE ENERGY SERVICES, LLC GM SERVICES GRABLE OIL COMPANY GRANT THORNTON LLP GREENE'S ENERGY GROUP GREGORY SALES & SERVICE INC GT OILFIELD REPAIR, INC. GUADALUPE VALLEY ELECTRIC GUERRA BROTHERS MASTER GUERRA BROTHERS SUCCESSORS LTD GULF COAST CHEMICAL, LLC

38 Case KG Doc 90-2 Filed 07/31/15 Page 20 of 26 GULF COAST LEASE SERVICE, INC GULF SOUTH SERVICES, INC. GULF WELLS INC GUY HESTER HAHNS BACK HOE SERVICE HALCON RESOURCES OPERATING-JIB HAMMAN OIL & REFINING COMPANY HARRIS CAPROCK COMMINUCATIONS HARRIS GALVESTON HIGH POINT GAS TRANSMISSION HILCORP ENERGY CO. INC. HOACTZIN PARTNERS LP HOBSON OILFIELD CONSTRUCTION L HOLLOWAY PUMPING SVCS. INC. HOUSTON EXPRESS HOWARD EXPLORATION INC HRACO IHS GLOBAL INC IMPROVE WATER ASSOCIATION INDEMCO LP INDMAR SERVICE & SUPPLY CORP INTERCALL INTERTEK USA INC IVANS AUTOMOTIVE J CONNOR CONSULTING INC J&J PIPE & SUPPLY INC. J&R VALLEY OILFIELD SERV. INC. J.R. POUNDS, INC. JACKSBORO PUMP & SPECIALTY CO. JAMEX, INC. JANE JENKINS CRUMP JEANNE LIGHTON CASSATT SP JEFF BILBY'S ENGINE JEFFERSON DAVIS ELECTRIC COOP JESSE FONTENOT INC JET OILFIELD SERVICES JETT TESTERS, INC. JOAN G. CELLA ARCENEAUX J-O'B OPERATING COMPANY JOE'S SEPTIC CONTRACTORS, INC. JOHN THOMAS MCCUMBER JOHNSON SANFORD OPERATING JONES OILFIELD SRVC SUPPLY LLC JP CARPENTER KANSAS CITY ART INSTITUTE KARNES ELECTRIC COOPERATIVE KARPER COMPANY KATALYST DATA MANAGEMENT, LLC KDR SUPPLY INC KEMPER MUSEUM CONTEMPARY ART KENTWOOD SPRINGS

39 Case KG Doc 90-2 Filed 07/31/15 Page 21 of 26 L CHEM-TECH CO INC LANCE CONSTRUCTION SERV INC LANDMARK GRAPHICS LARRY DOIRON INC LARRY DOIRON LLC LARRY W SELLERS LEE ALLEN LICHTENSTEIN SP LEON E COMEAUX & ASSOCIATES LEXISNEXIS RISK DATA LGH INC LINDA LIGHTON ATKINS SP LISKOW & LEWIS, APLC LONE CYPRESS ENGINEERING II, LONE STAR INDUSTRIES LONE STAR OVERNIGHT LONGHORN SUPPLY CO. LOUISIANA ONE CALL SYSTEM INC LOUISIANA TANK INC. MAGIC VALLEY ELECTRIC CO-OP MAGNUM PRODUCING LP MAJOR EQUIPMENT & REMEDIATION MARITECH RESOURCES INC MARTIN ELECTRIC CO., INC. MARY FRANCES CUMPIAN MATAGORDA OILFIELD MCALLEN PUBLIC UTILITY MCCOMMONS OIL COMPANY MCMORAN OIL & GAS LLC MERIPLEX COMMUNICATIONS, LTD MICHAEL D JONES MICHAEL W SMITH MICROSOFT LICENSING GP MIDWAY ENERGY SERVICES MISSION VACCUM AND PUMP TRUCK MISSISSIPPI STATE OIL & MMR CONSTRUCTORS, INC. MONCLA E-LINE SERVICES, INC. MONCLA MARINE OPERATIONS, LLC MONCLA WORKOVER & DRILLING MPW ENTERPRISES, LLC MUTUAL OF OMAHA NALCO COMPANY NATIONAL BUGMOBILES INC NAVAJO FISHING & RENTAL NEW CENTURY EXPLORATION INC NEW TECH GLOBAL ENVIRONMENTAL NEWFIELD EXPLORATION COMPANY NEWLIN RENTALS-REPAIR NEWPARK MATS & INTEGRATED NICEFORO PENA NORTHWESTERN ELECTRIC

40 Case KG Doc 90-2 Filed 07/31/15 Page 22 of 26 NOV TUBOSCOPE OATES OILFIELD CONSTRUCTION CO O'CONNOR BUILDING PARTNERS, LP ODESSA PUMPS & EQUIPMENT INC OIL PATCH TRANSPORTATION INC OILFIELD CHEMICALS, INC. OLIVER J THIEME OPERATION COMFORT OSAGE ENVIRONMENTAL INC OXY USA INC. P.L.P.S., INC. P2ES HOLDINGS, LLC 2692 PANKEY PROPANE GAS CO. PATH OIL FIELD SERVICES, LLC PCM (PIPELINE CONSTRUCTION PCS FERGUSON, INC. PEARL RIVER VALLEY ELECTRIC POWER ASSOC PEERLESS SERVICES, LLC PERDURA ENERGY LLC PETRO HARVESTER LAUREL PETROGULF CORPORATION PETRO-HUNT LLC PETROQUEST ENERGY L.L.C. PETTUS OILFIELD SUPPLY PGX SUPPLY, LLC PIONEER COILED TUBING PIONEER OILFIELD TRUCKING, INC PIONEER WELL SERVICES PIONEER WIRELINE SERVICES LLC PIPELINE MEASUREMENT CO., LP PIPELINE RESOURCES, INC. PRECISION CRANE AND HYDRAULICS PRECISION GRAPHICS CENTERS PRECISION PUMP & VALVE II, INC PREMIER PIPE, LLC PRESSURE SERVICES, INC. PRO FIELD SERVICES, INC. PROFESSIONAL PUMPING SERVICES PRUET PRODUCTION CO, INC. PRUITT PRODUCTION SERVICES,INC PUEBLO TIRES AND SERVICE, INC. PUMP ENERGY INC PURCHASE POWER PWR-PROFESSIONAL WIRELINE PYRAMID TUBULAR PRODUCTS LP QUINN PUMPS INC R360-CENTRAL/GULF COAST REGION RACELAND RAW SUGAR, LLC RANDAZZO GIGLIO & BAILEY, LLC RANGE RESOURCES CORPORATION RANGER SERVICES INC.

41 Case KG Doc 90-2 Filed 07/31/15 Page 23 of 26 REAL BOTTLE WATER & ICE INC REBECCA LYNN MOORE REEF EXPLORATION INC RENAE G STANFORD INC RICHARD A. HOLLANDER REV. TR RICOH USA, INC. RIO BEEF FEEDYARD RIO FUEL & SUPPLY RIVERWAY BUSINESS SERVICES ROBERT W LIGHTON SP RODGERS GAUGING RODZ OILFIELD REPAIRS, LLC ROPES & GRAY LLP ROUNDTREE & ASSOCIATES ROY BAILEY CONSTRUCTION INC. RURAL TRASH SERVICE, INC. SABINE ENVIRONMENTAL SERVICES, SAFESITE INC SAMSON EXPLORATION, LLC SAN BERNARD ELECTRIC CO-OP INC SAN PATRICIO ELECTRIC SANDRIDGE E & P LLC SEGURO WELL SERVICE INC SELECT OILFIELD SERVICES, LLC SELECT TECHNOLOGIES LTD SETTOON FABRICATION INC SHAMROCK ENERGY SOLUTIONS, LLC SHANNON HARDWARE SHAREFILE SHARP PROPANE SHIRLEY RIGGS SHIVERS ENTERPRISES INC. SHORELINE ENERGY LLC SHRED-IT USA, LLC SIGMA SOLUTIONS, INCORPORATED SINTON ENERGY CO S-K BACKHOE OILFIELD SLEMCO SMART OILFIELD SERVICES, INC SMITH INTERNATIONAL INC SMITH OILFIELD SERVICES, INC SN OPERATING LLC SOLARWINDS INC SOUTH TEXAS CORRUGATED PIPE INC SOUTH TEXAS FILTER & SUPPLY CO SOUTHALL ASSOCIATES SOUTHERN BAY OPERATING LLC SPARKMAN INDUSTRIES, INC SPECIALTY OFFSHORE, INC. SPRINT SRUBAR WELDING

42 Case KG Doc 90-2 Filed 07/31/15 Page 24 of 26 STANDARD PARKING CORPORATION STAPLES ADVANTAGE STARBAND COMMUNICATIONS INC STARGEL OFFICE SYSTEMS INC STATOIL GULF SERVICES LLC STERLINGS VACUUM SERVICES, LLC STEVEN ROY CONN STRINGER'S OILFIELD SUE ANN OPERATING LC SUMMIT CASING EQUIPMENT SUNBELT RENTALS INDUSTRIAL SUPERIOR VACUUM SERVICE SUWANNEE SUPPLY INC SYNERGY RESOURCES, LLC T BAKER SMITH INC TANKS-A-LOT, INC. TANNER SERVICES LLC TECPETROL CORPORATION TERMINIX TERRI MOONEY-HOOKER TETRA TECHNOLOGIES INC TEXAS EXCAVATION SAFETY TEXAS HOT OILERS INC. THE GEORGE R BROWN PARTNERSHIP THOMAS PETROLEUM LLC THOMPSON'S ELECTRIC SVC INC THURMOND-MCGLOTHLIN INC TILLERY ELECTRIC TIME WARNER CABLE TIME WARNER TELECOM TLC TONERLAND LP T-MOBILE TONY LIONEL KUBENKA TOSHIBA FINANCIAL SERVICES TOTAL ENERGY SERVICES TRADEMARKS TRANSCONTINENTAL GAS TRANSTEX HUNTER, LLC TREYBIG INVESTMENTS LTD TRIO EQUIPMENT RENTAL LLC TRIPLE C PRODUCTION TRIPLE S MARINE LLC TUBING TESTERS, INC. TWIN TANK CO INC UNI-PRO BUSINESS SYSTEMS, INC. UNIT PETROLEUM COMPANY INC UNITED VISION LOGISTICS UNIVERSAL PROTECTION SERVICE URBAN SURVEYING INC VALLEY TELEPHONE COOPERATIVE VANGUARD VACUUM TRUCKS, LLC

43 Case KG Doc 90-2 Filed 07/31/15 Page 25 of 26 VENTURE OIL & GAS INC VERIZON BUSINESS SERVICES INC VERIZON SOUTHWEST INC VERIZON WIRELESS VERMILION PARISH POLICE JURY VERNON E FAULCONER INC VESCO, INC. VICTORIA ELECTRIC VITEX WIRELINE SERVICES INC VI-WOLF, LLC W D VON GONTEN&CO W&S SERVICES LLC W.E. HAYDEN LEASE SERVICE INC WAGNER OIL COMPANY WALTER EXPLORATION COMPANY WALTER OIL & GAS CORPORATION WARRIOR ENERGY SERVICES WARRIOR SUPPLY INC. WASTE MGMT OF LAKE CHARLES WASTE MGMT OF SOUTH LOUISIANA WAUKESHA-PEARCE INDUSTRIES INC WEATHERFORD ARTIFICIAL WEIR SEABOARD WHITE OAK OPERATING CO., LLC WILD HORSE RANCH, LTD. WILD WELL CONTROL WILDHORSE RESOURCES LLC WISE ELECTRIC COOPERATIVE INC WRIGHT MATERIALS INC X-CHEM, LLC XTO ENERGY INC YGRIEGA ENERGY COMPANY INC YORK ACIDIZING & CEMENTING LLC ZAYO GROUP, LLC ZEDI US, INC. ZEE MEDICAL, INC ZENO IMAGING ZOHO CORPORATION BANKRUPTCY PROFESSIONALS PORTER HEDGES LLP DUFF & PHELPS SECURITIES, LLC YOUNG CONAWAY STARGATT & TAYLOR, LLP PRIME CLERK, LLC ZOLFO COOPER SCOTT WINN BALMORAL ADVISORY SERVICES AKIN GUMP SCHULTE ROTH & ZEBEL LANDIS RATH & COBB RICHARDS, LAYTON & FINGER

44 Case KG Doc 90-2 Filed 07/31/15 Page 26 of 26 LOCKE LORD LLP OFFICE OF THE UNITED STATES TRUSTEE BENJAMIN HACKMAN CHRISTINE GREEN DAVID BUCHBINDER DIANE GIORDANO DION WYNN EDITH A. SERRANO HANNAH M. MCCOLLUM JAMES R. O'MALLEY JANE LEAMY JEFFREY HECK JULIET SARKESSIAN KAREN STARR LAUREN ATTIX LINDA CASEY MARK KENNEY MICHAEL PANACIO MICHAEL WEST RAMONA VINSON RICHARD SCHEPACARTER SHAKIMA L. DORTCH T. PATRICK TINKER TIIARA PATTON TIMOTHY J. FOX, JR. TONY MURRAY ASSIGNED BANKRUPTCY JUDGE KEVIN GROSS

45 Case KG Doc 90-3 Filed 07/31/15 Page 1 of 8 EXHIBIT B Engagement Agreement

46 Case KG Doc 90-3 Filed 07/31/15 Page 2 of 8

47 Case KG Doc 90-3 Filed 07/31/15 Page 3 of 8

48 Case KG Doc 90-3 Filed 07/31/15 Page 4 of 8

49 Case KG Doc 90-3 Filed 07/31/15 Page 5 of 8

50 Case KG Doc 90-3 Filed 07/31/15 Page 6 of 8