Case Document 897 Filed in TXSB on 06/04/18 Page 1 of 13

Transcription

1 Case Document 897 Filed in TXSB on 06/04/18 Page 1 of 13 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re COBALT INTERNATIONAL ENERGY, INC., et al., 1 Debtors x x Chapter 11 Case No (MI) (Jointly Administered) Re D.I. 894, 895 DECLARATION OF CHRISTOPHER B. BENNETT IN AID OF TELEPHONIC CONFERENCE REGARDING EMERGENCY MOTION TO IMPLEMENT THE PLAN IN FACILITATION OF ASSET SALES CHRISTOPHER B. BENNETT, pursuant to 28 U.S.C. 1746, hereby declares as follows 1. I am a lawyer in the Houston, Texas, office of Latham & Watkins LLP ( Latham or We ), counsel to TOTAL E&P USA, INC. ( TEP USA ). Together with my colleagues at Latham, I have represented TEP USA in its engagement with the Debtors, and I have been involved in the negotiations concerning TEP USA s purchase of assets from the Debtors. Except as otherwise indicated herein, all facts set forth in this Declaration are based upon my personal knowledge; information learned from my review of relevant documents; information supplied to me by members of TEP USA management and in-house counsel; or my opinion based on my experience, knowledge and information concerning TEP USA s operations and its participation in the Debtors 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are Cobalt International Energy, Inc. (1169) ( Cobalt ); Cobalt International Energy GP, LLC (7374); Cobalt International Energy, L.P. (2411); Cobalt GOM LLC (7188); Cobalt GOM # 1 LLC (7262); and Cobalt GOM # 2 LLC (7316). The Debtors service address is 920 Memorial City Way, Suite 100, Houston, Texas

2 Case Document 897 Filed in TXSB on 06/04/18 Page 2 of 13 bankruptcy cases. I am over 18 years of age, of sound mind, and otherwise competent to make this Declaration. 2. This Declaration offers facts relevant to the dispute between the Plan Administrator and TEP USA concerning ownership of certain equipment stored in coastal yards and held for future use in offshore Gulf of Mexico operations. The particular focus of this Declaration is the Plan Administrator s assertion, set forth in the Emergency Motion to Implement the Plan in Facilitation of Asset Sales [D.I. 894] (the Motion ), 2 that resolution of the aforementioned dispute constitutes an emergency. A. Debtors Sell Substantially All Assets, Then Commence Attempts to Resell 3. The Debtors ran a sale process designed to dispose of all or substantially all of [their] assets. Disclosure Statement [D.I. 562] at 2. As part and parcel of that process, bidders were invited to bid on five separate asset packages each of the Heidelberg, Shenandoah, Anchor, and North Platte discoveries (collectively, the Discoveries ), and the Debtors exploration leases (the Explo Blocks and together with the Discoveries, the Offshore Assets ). To my knowledge, nowhere in any of the Debtors sale materials were bidders invited to bid on equipment separate and apart from the Offshore Assets, nor were bidders cautioned that an unknown quantum of equipment, already owned by Cobalt, and useful in connection with future operations at the Offshore Assets, was excluded from the biddable assets. 4. TEP USA successfully purchased not only North Platte (together with Statoil Gulf of Mexico LLC ( Statoil )), but also Anchor and certain of the Explo Blocks, pursuant to three separate asset purchase agreements (collectively, the TEP USA APAs ). In keeping with the expectation that it 2 Capitalized terms used but not otherwise defined herein have the meaning given them in the Motion. 2

3 Case Document 897 Filed in TXSB on 06/04/18 Page 3 of 13 was purchasing everything owned by Cobalt and useful to North Platte, Anchor, and the purchased Explo Blocks, each of the TEP USA APAs states that the Purchased Assets include all equipment, machinery, fixtures and other real, personal, and mixed property, operational and nonoperational, known or unknown, located on, or used or held for use in connection with, the Properties. See Anchor APA 2.1(vi) [D.I ]; North Platte APA 2.1(vi) [D.I ]; Explo Block APA 2.1(vi) [D.I ]. 5. Despite this background and the contractual language, the Debtors have already once attempted to sell (more precisely, resell) equipment they had already sold to TEP USA and Statoil under the TEP USA APAs. Specifically, the Debtors previously attempted to sell to a third-party a wellhead system (the NP5 Wellhead System ) that TEP USA and Statoil understood to have been included in the North Platte assets. At that time, the Debtors asserted that the NP5 Wellhead System was not included in [an] AFE that [TEP USA] signed and [was] not part of the asset sale. from Bob Writt to Didier Poulet and Laurent Vervynk dated March 29, 2018 [hereinafter Writt ]. 3 The Debtors gave TEP USA and Statoil less than 24-hours notice of the intended sale and requested that TEP USA and Statoil pay an additional $1.3 million to keep the system. See id. TEP USA and Statoil objected, and after multiples exchanges on this topic, the Debtors ultimately acquiesced. 6. The prior attempted sale of the NP5 Wellhead System is additionally noteworthy here because the Plan Administrator now touts the transfer of the NP5 Wellhead Systems and additional inventory to TEP USA and Statoil as an example of its allegedly orderly process of separating sold equipment from unsold equipment based on whether the Debtors had allocated such equipment to a particular 3 A true and correct copy of the Writt is attached hereto as Exhibit A, in the form forwarded to the Declarant by Rich Frazier, Lead Counsel Oil & Gas for TEP USA. 3

4 Case Document 897 Filed in TXSB on 06/04/18 Page 4 of 13 Offshore Asset pursuant to an AFE. See Motion at 25. It seems plain from the history of the NP5 Wellhead System that absence of allocation pursuant to a signed AFE did not determine whether such equipment was held for use in connection with North Platte. B. The Debtors Delay, Now Assert Emergency Need to Sell Additional Equipment 7. TEP USA first became aware of the Debtors intent to hold back additional equipment in late April when it received from the Debtors lists of the equipment the Debtors intended to transfer, or not transfer, to TEP USA at the relevant coastal yards. 8. Thereafter, I made repeated attempts to engage the Debtors representatives on the factual nature of the equipment at issue in order to attempt to determine if such equipment was held for use in connection with Offshore Assets acquired by TEP USA, including by immediately requesting that the Debtors refrain from any attempted third-party sales until we had discussed and resolved the dispute. On May 7, I and in-house counsel from Total, together with in-house and outside counsel from Statoil, conferenced with representatives of the Debtors and requested that the Debtors provide additional information on the equipment that the Plan Administrator intended to sell, which the Debtors agreed to do. When I received no response, I contacted the Debtors representatives again, on May 15, reiterating the request for additional information. I received a reply on May 17 that the Debtors representatives were still working through the issue and would circle back. from Robert Bell to Chris Bennett dated May 17, 2018 [hereinafter Bell ] Neither I nor any of my colleagues at Latham received any meaningful further communication on the topic until last Friday, June 1, when the Plan Administrator s counsel advised that the Plan 4 A true and correct copy of the Bell is attached hereto as Exhibit B. 4

5 Case Document 897 Filed in TXSB on 06/04/18 Page 5 of 13 Administrator had found a buyer for some or all of the disputed equipment and intended to sell some or all of the equipment next week i.e., this week unless TEP USA and Statoil agreed to purchase it first. This request recalled to my mind the events surrounding the NP5 Wellhead System transfer. 10. While on this call, we requested to know any facts that would support the assertion that the equipment was not held for use in connection with TEP USA s and/or Statoil s purchased Offshore Assets. A representative of the Debtors familiar with their operations opined that much of the equipment was more appropriate for use with appraisal wells, which were no longer needed at North Platte. We then requested to know why, if that were true, such equipment was not held for use in connection with TEP USA s purchased Explo Blocks. The Debtors operational representative refused to answer and left the call. The call ended shortly thereafter. 11. My colleagues at Latham, and counsel for Statoil, requested to speak with the Plan Administrator s counsel again on June 1, in the evening. On that call, we requested again that the Plan Administrator not attempt to sell the equipment until we had resolved our dispute. The Plan Administrator s counsel stated that she understood our request and that the Plan Administrator would likely file a pleading with this Court seeking resolution of the dispute. Roughly 15 minutes after that call ended, the Plan Administrator s Motion appeared on the docket. 12. In short, despite our repeated requests over the course of roughly a month and a half, the Debtors and the Plan Administrator refused to provide any additional information of substance relating to the foregoing. 5

6 Case Document 897 Filed in TXSB on 06/04/18 Page 6 of 13 C. The Motion and Scheduling the Dispute 13. Despite our repeated requests on the June 1 calls, none of the Debtors or Plan Administrators representatives provided sufficient details regarding the alleged prospective equipment purchaser. The Motion and accompanying Declaration assert that an emergency exists because a potential buyer for certain equipment may lose interest if the sale is not consummated in the coming week or weeks. Declaration of Michael Jadick dated May 31, , 6 [D.I ] (the Declaration ). Neither the Motion nor the Declaration identifies the particular buyer, the particular equipment, or any particular deadline; nor do the Motion or the Declaration state whether such sale is for all or only a portion of such equipment. 14. To resolve this dispute will require discovery of evidence in the Debtors exclusive possession, including but not limited to what each item of relevant equipment is, where it is held, why it was purchased, what it has been used for previously, what it could be used for in the future, how it is referenced in the Debtors books and records, and related testimony. [signature page follows] 6

7 Case Document 897 Filed in TXSB on 06/04/18 Page 7 of 13

8 Case Document 897 Filed in TXSB on 06/04/18 Page 8 of 13 Exhibit A Writt

9 Case Document 897 Filed in TXSB on 06/04/18 Page 9 of 13 REDACTED REDACTED From Bob Writt [mailtobob.writt@cobaltintl.com] Sent Thursday, March 29, PM To Didier POULET; Laurent VERVYNCK Cc Rich Smith; Rod Skaufel; Vashi, Rahul D.; Robert Bell; Mickey Dark; Hanson, JP; Haney, Michael; Cohen, Zack; White, Chris; Christopher Olson; Ryan Murphy Subject NP5 Back-up Wellhead Importance High Didier, Cobalt has received an offer from a third party to purchase the 20ksi backup wellhead in its inventory that was slated NP5. The backup wellhead was not included in the long lead NP5 AFE that Total signed and is not part of the asset sale. 1

10 Case Document 897 Filed in TXSB on 06/04/18 Page 10 of 13 We thought as courtesy to Total that we would offer you an opportunity to purchase the 20ksi backup wellhead first. The cost for this wellhead is $ $1,371,033.34, see attached. Cobalt needs a response by end of business by noon tomorrow, Friday Mar 30 th, otherwise Cobalt will proceed to sell the wellhead to the other party. Please call if you have any questions. Thanks, Bob Bob Writt Vice President, Projects Cobalt International Energy, Inc.th 920 Memorial City Way, Suite 100 Houston, Texas O M bob.writt@cobaltintl.com 2

11 Case Document 897 Filed in TXSB on 06/04/18 Page 11 of 13 Exhibit B Bell

12 Case Document 897 Filed in TXSB on 06/04/18 Page 12 of 13 From Sent To Cc Subject Robert Bell Thursday, May 17, PM Bennett, Chris (HN) Allen, Corey (HN); Vashi, Rahul D. RE Updates from Last Week's Call Chris, We are working through them and will circle back to you. I think Lauren Abbey asked about the updates to our BOEM Qualification Cards on the call as well. I can report that those are being submitted to BOEM today. Did you ever receive a file-stamped copy of the SLB Lien Release? Don t think I ve seen it. Thanks, Robert From Chris.Bennett@lw.com [mailtochris.bennett@lw.com] Sent Tuesday, May 15, PM To Robert Bell <robert.bell@cobaltintl.com> Cc akowis@orrick.com; jroger@orrick.com; rich.frazier@total.com; Corey.Allen@lw.com Subject Updates from Last Week's Call Robert, Wanted to follow up on our call last week and see if there were any material updates on your end on the facts surrounding the inventory or with respect to the analysis on the other explo blocks? Let us know if easier to discuss live. Thank you. Chris Bennett LATHAM & WATKINS LLP 811 Main Street Suite 3700 Houston, TX Direct Dial Fax chris.bennett@lw.com http// 1

13 Case Document 897 Filed in TXSB on 06/04/18 Page 13 of 13 This may contain material that is confidential, privileged and/or attorney work product for the sole use of the intended recipient. Any review, disclosure, reliance or distribution by others or forwarding without express permission is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies including any attachments. Latham & Watkins LLP or any of its affiliates may monitor electronic communications sent or received by our networks in order to protect our business and verify compliance with our policies and relevant legal requirements. Any personal information contained or referred to within this electronic communication will be processed in accordance with the firm's privacy notices and Global Privacy Standards available at 2