Case Document 324 Filed in TXSB on 08/29/16 Page 1 of 11 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

Transcription

1 Case Document 324 Filed in TXSB on 08/29/16 Page 1 of 11 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS In re: ) Chapter 11 ) LINC USA GP, et al. 1 ) Case No (DRJ) ) Debtors. ) (Jointly Administered) NOTICE OF FILING OF THE DECLARATION OF JUDE ROLFES IN SUPPORT OF THE ENTRY OF ORDERS AUTHORIZING THE DEBTORS TO SELL THEIR ASSETS PLEASE TAKE NOTICE that pursuant to the Order Approving Bidding Procedures and Protections; Approving Procedures for the Assumption and Assignment of Contracts and Leases; Scheduling Bidding Deadline, Auction Date, and Sale Hearing Date; and Approving Form and Notice Thereof [Dkt. No. 205] (the Bidding Procedures Order ) 2, a hearing will be held before the Honorable David R. Jones of the United States Bankruptcy Court for the Southern District of Texas on August 31, 2016, at 2:00 p.m. (CT) (the Sale Hearing ), at which the debtors and debtors in possession (the Debtors ) will seek entry of orders approving and authorizing, among other things, the sale of substantially all of the Debtors assets in accordance with the terms of the Asset Purchase Agreements between the Debtors and the Successful Bidders. PLEASE TAKE FURTHER NOTICE that the Debtors hereby file the attached Declaration of Jude Rolfes in Support of the Entry of Orders Authorizing the Debtors to Sell Their Assets (the Declaration ). The Debtors reserve all of their rights to modify, amend, or supplement the attached Declaration as may be necessary or appropriate. 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtors federal tax identification number, are: Linc Energy Finance (USA), Inc. (6684); Linc USA GP (5234); Linc Energy Resources, Inc. (9613); Linc Gulf Coast Petroleum, Inc. (6790); Linc Energy Petroleum (Louisiana), LLC (1074); Linc Alaska Resources, LLC (2362); Paen Insula Holdings, LLC (1681); Linc Energy Petroleum (Wyoming), Inc. (9859); Diasu Holdings, LLC (9626); Diasu Oil & Gas Company, Inc. (8926); and Linc Energy Operations, Inc. (5806). 2 Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Bidding Procedures Order. #

2 Case Document 324 Filed in TXSB on 08/29/16 Page 2 of 11 Respectfully Submitted, BRACEWELL LLP By: /s/ Jason G. Cohen Jason G. Cohen Texas Bar No Jason.Cohen@bracewelllaw.com William A. (Trey) Wood III Texas Bar No Trey.Wood@bracewelllaw.com 711 Louisiana, Suite 2300 Houston, Texas Telephone: (713) Facsimile: (713) COUNSEL FOR THE DEBTORS AND DEBTORS IN POSSESSION #

3 Case Document 324 Filed in TXSB on 08/29/16 Page 3 of 11 Declaration of Jude Rolfes #

4 Case Document 324 Filed in TXSB on 08/29/16 Page 4 of 11 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS In re: ) Chapter 11 ) LINC USA GP, et al 1 ) Case No (DRJ) ) Debtors. ) (Jointly Administered) DECLARATION JUDE ROLFES IN SUPPORT OF THE ENTRY OF ORDERS AUTHORIZING THE DEBTORS TO SELL THEIR ASSETS Pursuant to 28 U.S.C. 1746, I, Jude Rolfes, declare as follows: 1. My name is Jude Rolfes. I am over the age of 18 and of sound mind and capable of making this declaration. I have personal knowledge of the facts contained in this Declaration, and they are true and correct to the best of my knowledge. 2. I am the Vice President-Corporate Development for Linc USA GP, Linc Energy Finance (USA), Inc., Diasu Holdings, LLC, Diasu Oil & Gas Company, Inc., Linc Alaska Resources, Inc., Linc Energy Petroleum (Louisiana), L.L.C., Linc Energy Petroleum (Wyoming), Inc., Linc Energy Resources, Inc., Linc Energy Operations, Inc., Linc Gulf Coast Petroleum, Inc., and Paen Insula Holdings, LLC (together, the "Debtors"). I am familiar with the Debtors' day-to-day operations, business affairs, books and records. I have worked for the Debtors since 2011 and have served as Vice President-Corporate Development since June I submit this declaration (this "Declaration") in support of the entry of orders authorizing the Debtors to sell their assets (each a "Sale Order" and, collectively, the "Sale Orders"). I have worked with the Debtors' investment banker, Parkman Whaling, since early 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtors' federal tax identification number, are: Linc Energy Finance (USA), Inc. (6684); Linc USA GP (5234); Linc Energy Resources, Inc. (9613); Linc Gulf Coast Petroleum, Inc. (6790); Linc Energy Petroleum (Louisiana), LLC (1074); Linc Alaska Resources, LLC (2362); Paen Insula Holdings, LLC (1681); Linc Energy Petroleum (Wyoming), Inc. (9859); Diasu Holdings, LLC (9626); Diasu Oil & Gas Company, Inc. (8926); and Linc Energy Operations, Inc. (5806). #

5 Case Document 324 Filed in TXSB on 08/29/16 Page 5 of 11 May 2016 relate to the sale of the Debtors' Oil and Gas Assets and have participated in discussions, due diligence and negotiations with various parties interested in the Debtors' assets. If called upon to testify, I would testify competently to the facts set forth in this Declaration. 4. In forming the opinions set forth herein, I have relied upon and/or considered, among other things, the following: (a) the Debtors ' Motion for (A) Entry of an Order (!) Approving Bidding Procedures; (II) Scheduling Bidding Deadline, Auction Date, and Sale Hearing Date; (Ill) Approving Form and Notice Thereof; (B) Entry of an Order after the Sale Hearing (I) Authorizing the Debtors to Sell their Assets; and (II) Authorizing the Debtors to Assume and Assign Certain Executory Contracts and Unexpired Leases; and (C) Granting Related Relief[Dkt. No. 129] (the "Sale Motion"); 2 (b) the Order Approving Bidding Procedures and Protections; Approving Procedures for the Assumption and Assignment of Contracts and Leases; Scheduling Bidding Deadline, Auction Date, and Sale Hearing Date; and Approving Form and Notice Thereof[Dkt. No. 205] (the "Bidding Procedures Order"); (c) discussions with the Debtors' advisors and professionals concerning the Debtors' business and marketing of the Debtors' Oil and Gas Assets; ( d) discussions with potential purchasers of the Debtors' Oil and Gas Assets and other interested parties; and ( e) my experience in the oil and gas industry. Background 5. On July 11, 2016, the Court entered the Final Order (I) Authorizing Debtors (A) to Obtain Postpetition Financing Pursuant to 11 U.S.C. 105, 361, 362, 364(c)(l), 364(c)(2), 364(c)(3), 364(d)(l) and 364(e) and (B) to Utilize Cash Collateral Pursuant to 11 U.S.C. 363 and (II) Granting Adequate Protection to Prepetition Secured Parties Pursuant to 11 U.S.C. 361, 362, 363 and 364 [Dkt. No. 196] (the "Final DIP Order"). Prepetition, I was heavily 2 Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Sale Motion. -2-

6 Case Document 324 Filed in TXSB on 08/29/16 Page 6 of 11 involved in the negotiations surrounding the Debtors' postpetition financing. The DIP Credit Agreement approved by the Final DIP Order required the Debtors, among other things, to pursue a sale of substantially all of their assets. To this end, the Debtors filed the Sale Motion on June 21, 2016, in order to comply with the terms of the DIP Credit Agreement, designating the First Lien Noteholders as the stalking horse bidder for the Debtors' Gulf Coast, Wyoming and Alaska Assets, with a credit bids of $34 million, $1.5 million and $25 million, respectively. The Court approved the bidding procedures portion of the Debtors' Sale Motion on July 12, [Dkt. 205]. Marketing Efforts in Connection with the Assets 6. In early May 2016, the Debtors retained Parkman Whaling as their investment banker in order to market their assets. The Court approved Parkman Whaling's retention retroactively to the petition date on July 18, 2016 [Dkt. No. 221]. Among other things, Parkman Whaling sent out a high-level one page teaser to approximately 200 potentially interested parties and shortly thereafter set up a virtual data room containing information about the Debtors' Oil and Gas Assets. I reviewed the teaser for accuracy prior to distribution. Additionally, I assisted in gathering the diligence materials contained in the data room, including operational materials, as well as attended numerous meetings with both Parkman Whaling and interested third parties regarding the diligence materials. 7. Although the Debtors received several bids by the deadline established in the Sale Motion, none of the bids received were considered to be Qualifying Bids upon receipt. However, the Debtors and their professionals worked with the bidders to cure certain deficiencies in their proposed bids and thereafter, upon consultation with the DIP Lenders, Prepetition Lenders and the Creditors Committee, lowered the entry level bid on the Gulf Coast -3-

7 Case Document 324 Filed in TXSB on 08/29/16 Page 7 of 11 Assets to $25 million. The Debtors filed a notice of the revised Gulf Coast Asset bid threshold [Dkt. No. 302], and at the Debtors' direction, Parkman Whaling sent this notice to all parties who had signed a non-disclosure agreement with the goal of encouraging more bids. In all, I believe the bidding procedures were substantively and procedurally fair to all parties and potential bidders and designed to maximize value for the Debtors. The bidding procedures provided ample opportunity for any person to make higher and better offers for the Debtors' Oil and Gas Assets. The Auction 8. I attended the Auction of the Debtors' Oil and Gas Assets on August 23, 2016, at the offices of Bracewell LLP. The Debtors entered the auction with four bidders for the Gulf Coast Assets (including the stalking horse bidder), two bidders for the Wyoming Assets (including the stalking bidder) and only the stalking horse bidder for the Alaska Assets. The majority of the activity at the Auction was on account of highly competitive, multi-round bidding on the Gulf Coast Assets. There was also competitive, multi-round bidding activity surrounding the Wyoming Assets. 9. The high bid for the Gulf Coast Assets entering the Auction was for $30,000,0000. The high bid for the Wyoming Assets entering the Auction was $1,507,500. The high bid for the Alaska Assets entering the Auction was the credit bid of $25,000,000. At the conclusion of the Auction, the Successful Bids included the purchase amounts of $37,500,000 for the Gulf Coast Assets by Torrent Gulf Coast, LLC and $1,900,000 for the Wyoming Assets by Big Muddy Opportunities, LLC. The Debtors designated Energy Reserves Group, LLC and Arctic Acquisition, Inc. as the Back-up Bidders for the Gulf Coast Assets and the Wyoming Assets, respectively. Because there were no other bids for the Alaska Assets, the stalking horse -4-

8 Case Document 324 Filed in TXSB on 08/29/16 Page 8 of 11 bidder was declared the Successful Bidder for the Alaska Assets (which credit bid was subsequently increased from $25 million to $80 million). 10. The Debtors subsequently filed notices of the Successful Bids. I believe that the purchase and sale agreements as executed between the Debtors, Torrent, and Big Muddy (the "Purchase and Sale Agreements"), represent the highest and otherwise best offers received for the Gulf Coast Assets and Wyoming Assets, respectively. I believe the credit bid submitted by the stalking horse bidders is the best and highest offer received for the Alaska Assets, as no other Qualified Bids were received. Accordingly, Court approval of the Purchase and Sale Agreements would maximize the Debtors' recovery for the Oil and Gas Assets and is in the best interest of the Debtors and their estates, creditors and other parties in interest. Further, I believe that the sale process, including the Auction, was conducted without collusion and in accordance with the bidding procedures, and in a way that maximized value for the Debtors' estates, as evidenced by the competitive bidding at the Auction. 11. I believe the purchase prices constitute reasonably equivalent value and fair consideration for the Debtors' Oil and Gas Assets. The Purchase and Sale Agreements were not entered into for the purpose of hindering, delaying or defrauding creditors or with any other fraudulent or improper purpose. The Purchase and Sale Agreements 12. In addition to being the highest and best offers for the Debtors' Oil and Gas Assets, I believe that the Purchase and Sale Agreements were negotiated and undertaken by the parties at arm's length, without collusion or fraud, and in good faith. None of the Purchasers is an insider of the Debtor, as that term is defined in the Bankruptcy Code, and each Purchaser -5-

9 Case Document 324 Filed in TXSB on 08/29/16 Page 9 of 11 recognized that the Debtors were free to deal with any interested party, complied with the Bidding Procedures, and willingly subjected its bid to the Bidding Procedures. 13. Furthermore, the Debtors: (i) have full power and authority to execute the Purchase and Sale Agreements and all other documents contemplated thereby; (ii) have all of the power and authority necessary to consummate the transactions contemplated by the Purchase and Sale Agreements; and (iii) have taken all company action necessary to authorize and approve the Purchase and Sale Agreements and the sales of the Assets. No consents or approvals, other than those expressly provided for in the Purchase and Sale Agreements or the Sale Orders, are required for the Debtors to consummate the sales. 14. Moreover, I believe there is a sufficient need for an immediate sale of the Debtors' Oil and Gas Assets. A Sale Order is required to be entered by August 31, 2016, under the Debtors' DIP Credit Agreement. Additionally, the Debtors have an immediate need for capital in order to administer their estates and any delay in consummating a sale may force the Debtors to accept a lower price for their Oil and Gas Assets, which are, by nature, diminishing assets. Accordingly, the Debtors' sale timeline is necessary to preserve the value of the Debtors' businesses for the benefit of their estates, their creditors and all other parties in interest. 15. To my knowledge, the sales do not dictate the terms of any current or future plan of reorganization. Transfer Free and Clear 16. The Debtors are the sole and lawful owners of the Oil and Gas Assets and the transfer of each of the Oil and Gas Assets to the Purchasers is intended to be, as of the Closing Date, a legal, valid and effective transfer of the Oil and Gas Assets, which transfer is intended to vest the Purchasers with all right, title, and interest of the Debtors to the Assets free and clear of -6-

10 Case Document 324 Filed in TXSB on 08/29/16 Page 10 of 11 all liens (other than Permitted Encumbrances), debts, liabilities, obligations, demands, guaranties, options, rights, contractual commitments, restrictions, interest and matters of any kind and nature. I believe the Purchasers would not have entered into the Purchase and Sale Agreements and would not consummate the transactions contemplated thereby if the sale of the Oil and Gas Assets were not free and clear of all such liens, claims and encumbrances. 17. Furthermore, each Purchaser is not holding itself out to the public as a continuation of the Debtors and is not an insider or affiliate of the Debtors, as those terms are defined in the Bankruptcy Code, and no common identity of incorporators, directors or stockholders exists now or has ever existed between the Purchasers and the Debtors. Executory Contracts 18. I believe the Assigned Contracts in each Purchase and Sale Agreement are an integral part of the sale of the Debtors' Oil and Gas Assets and their assumption and assignment are both reasonable and necessary and an enhancement to the value of the Debtors' estates. I further believe that each Purchaser has demonstrated adequate assurance of future performance of all of its respective Assigned Contracts within the meaning of section 365 of the Bankruptcy Code, including each Purchaser's promise to perform the Debtors' obligations under the Assigned Contracts for periods on and after the closing. Conclusion 19. For all of the foregoing reasons, I believe that the Debtors, with the help of their advisors, have conducted a robust sale and marketing process for the Oil and Gas Assets that has maximized value for their creditors and estates. In light of the Debtors' comprehensive sale and marketing process and the results of the Auction, I do not believe that further marketing of the Oil and Gas Assets would have resulted in higher or otherwise better offers for the Oil and Gas -7-

11 Case Document 324 Filed in TXSB on 08/29/16 Page 11 of 11 Assets and that the sales contemplated by the Purchase and Sale Agreements should be approved by this Court. Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge, information and belief. Executed on: A <A J L~.Jf 21, 2016 By: ,t.'----?~~---,.,~~_,,_--=--~~~~~- J t-corporate Development