Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: ATP Oil & Gas Corporation, Debtor. Chapter 11 Case No.: 12-36187 DEBTOR S SUPPLEMENTAL APPLICATION FOR AN ORDER EXPANDING THE SCOPE OF THE RETENTION AND EMPLOYMENT OF PRICEWATERHOUSECOOPERS LLP AS THE DEBTOR S INDEPENDENT AUDITORS AND TAX ADVISORS NUNC PRO TUNC TO AUGUST 15, 2013 NOTICE UNDER COMPLEX CASE ORDER A HEARING WILL BE CONDUCTED ON THIS MATTER ON OCTOBER 10, 2013, AT 1:30 P.M. AT U.S. BANKRUPTCY COURT, 515 RUSK AVENUE, HOUSTON, TEXAS 77002. IF YOU OBJECT TO THE RELIEF REQUESTED, YOU MUST RESPOND IN WRITING, SPECIFICALLY ADDRESSING EACH PARAGRAPH OF THIS PLEADING. UNLESS OTHERWISE DIRECTED BY THE COURT, YOU MUST FILE YOUR RESPONSE WITH THE CLERK OF THE BANKRUPTCY COURT WITHIN TWENTY-THREE (23) DAYS FROM THE DATE YOU WERE SERVED WITH THIS PLEADING. YOU MUST SERVE A COPY OF YOUR RESPONSE ON THE PERSON WHO SENT YOU THE NOTICE; OTHERWISE, THE COURT MAY TREAT THE PLEADING AS UNOPPOSED AND GRANT THE RELIEF REQUESTED. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEYS. ATP Oil & Gas Corporation ( ATP or the Debtor ) hereby supplements its Application for entry of an order, substantially in the form attached hereto as Exhibit A (the Proposed Order ), expanding the scope of the retention and employment of PricewaterhouseCoopers LLP ( PwC ) as the Debtor s Independent Auditors and Tax Advisors Nunc Pro Tunc to August 15, 2013 (this Supplemental Application ), pursuant to the terms and conditions of the Supplemental Tax Advisory Engagement Letter with respect to certain tax advisory services to be provided to the Debtor by PwC and subject to the terms of the Initial
Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 2 of 8 Retention Order (each as defined and described in further detail below). In support of this Supplemental Application, the Debtor respectfully states as follows: I. JURISDICTION AND VENUE 1. This Court has jurisdiction over this Application pursuant to 28 U.S.C. 157 and 1334. Venue of the Debtor s Chapter 11 case in this district is proper pursuant to 28 U.S.C. 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. 157(b). The statutory predicate for the relief sought hereby are Sections 327(a), 328, 330, 331, and 1107(b) of the Bankruptcy Code, and Rules 2014 and 2016 of the Federal Rules of Bankruptcy Procedure. II. PROCEDURAL STATUS 2. On August 17, 2012 (the Petition Date ), the Debtor filed a voluntary petition for relief pursuant to Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the Bankruptcy Court ). 3. The Debtor continues to operate its businesses as debtor-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. An Official Committee of Unsecured Creditors was appointed by the U.S. Trustee on or about August 28, 2012. III. BACKGROUND A. Initial Retention Application and Initial Retention Order 4. On September 17, 2012, the Debtor filed its Application Pursuant to Sections 327 and 328 of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure for Authorization to Retain Pricewaterhousecoopers LLC as the Debtor s Independent Auditors and Tax Advisors [Dkt. No. 368] (as further supplemented by a subsequent Supplement to Application Pursuant to Sections 327 and 328 of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure for Authorization to Retain Pricewaterhousecoopers LLC as the Debtor s Independent Auditors and Tax Advisors [Dkt. No. 612], as supplemented, 2
Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 3 of 8 the Initial Retention Application ), as well as the Declaration of John Brady in support of the Initial Retention Application. 5. On November 1, 2012, the Court entered an Order approving the Initial Retention Application at Docket No. 765 (the Initial Retention Order ). 1 The Initial Retention Order authorizes the retention and employment of PwC as independent auditors and tax advisors to the Debtor, nunc pro tunc to the Petition Date, pursuant to the terms and conditions of the Engagement Letters, subject to the limitations and modifications provided for in the Initial Retention Order. A copy of the Initial Retention Order is attached hereto as Exhibit B. 6. Pursuant to the Initial Retention Order and the Tax Advisory Engagement Letter, among other things, PwC provided tax return preparation services with respect to income tax returns of the Debtor and certain of its subsidiaries and/or affiliates for the tax year ending 2011. seeking to retain PwC as the Debtor s independent auditors and tax advisors under the terms of the Supplemental Tax Advisory Engagement Letter. 7. The Initial Retention Order further provides that to the extent that the Debtor requests that PwC perform additional services not contemplated by the Engagement Letters or directly related to the services detailed in the Engagement Letters that the Debtor shall seek further application for approval by the Court of any such additional services. B. Supplemental Tax Advisory Engagement Letter for 2012 Income Tax Return Preparation 8. Subsequent to the Court s entry of the Initial Retention Order, the Debtor engaged PwC to assist the Debtor in preparing required 2012 income tax returns, as well as to continue to provide the Debtor with advice and assistance with respect to matters involving the Internal Revenue Service or other taxing authorities (or such other additional tax planning and 1 Capitalized terms used but not otherwise defined herein have the meaning attributed to them in the Initial Retention Order 3
Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 4 of 8 advisory services as the Debtor determines that it requires of PwC in the exercise of its business judgment) pursuant to the terms and conditions of that certain engagement letter between the Debtor and PwC dated August 15, 2013 and attached hereto as Exhibit C (the Supplemental Tax Advisory Engagement Letter ). As discussed below, the expansion of PwC s scope of services under the Supplemental Tax Advisory Engagement Letter is largely related to the preparation of various tax returns for the Debtor and certain of its subsidiaries or affiliates for the tax year ending December 2012 and the general tax advisory services to be provided by PwC under the Tax Advisory Engagement Letter approved by the Initial Retention Order are not otherwise affected (and the Debtor and PwC intend such services to continue pursuant to the terms of the Supplemental Tax Advisory Engagement Letter). 9. Consistent with the terms of the Supplemental Tax Advisory Engagement Letter, PwC will provide assistance in both general and specific matters related to tax advice, including, without limitation: (a) preparation and signing of various federal income tax returns related to the Debtor and certain of its affiliates and subsidiaries for the tax year ending December 31, 2012; (b) providing advice, answers to questions and/or opinions on tax planning or reporting matters; and (c) providing advice and/or assistance to the Debtor with respect to matters involving the Internal Revenue Service or other tax authorities on an as-needed or as-requested basis. 10. The Debtor submits that the services to be rendered under the Supplemental Tax Advisory Engagement Letter will not duplicate the services to be provided by other professionals in this Chapter 11 case and that the Debtor has not hired any other professional to perform the tax preparation and advisory services for which PwC is being retained under the Supplemental Tax Advisory Engagement Letter. 4
Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 5 of 8 C. Compensation for Services Under the Supplemental Tax Advisory Engagement Letter 11. The Debtor requests that the Court authorize the retention of PwC under the terms and conditions set forth in the Supplemental Tax Advisory Engagement Letter, and the Debtor requests authority to compensate and reimburse PwC in accordance with the payment terms, procedures, and conditions set forth therein for services rendered and expenses incurred in connection with the Debtor s Chapter 11 case. The Supplemental Tax Advisory Engagement Letter s terms and conditions provided for and will provide for the following: (a) Fixed Fee Compensation: The services PwC provides in connection with the engagements set forth in the Supplemental Tax Advisory Engagement Letter are not compensated on an hourly basis. Rather, PwC provides such services primarily on a fixed-fee basis with installments billed on an incremental basis. Presently, the fixed fees for the services contemplated under the Supplemental Tax Advisory Engagement Letter are as follows: Engagement Letter Fixed -Fee Arrangement Tax Return Preparation Services $60,000 DD&A Computations $40,000 M-3 Development $25,000 (b) Nature of Estimates: These fixed-fee estimates are based on the time required by the individuals assigned to the Debtor' engagement. In addition, the fee estimates are based on the assumption that the Debtor will provide the information and assistance to PwC detailed in the Supplemental Tax Advisory Engagement Letter. If additional audit, accounting or tax procedures are necessary to complete the services and related report(s) or if the Debtor fails to satisfy its obligations, PwC will provide an estimate to the Debtor and the Court upon determination of the value of any such incremental services when the resulting incremental accounting services can be reasonably anticipated to cause the aggregate fees to PwC to exceed the fixed-fee contemplated by $200,000 or more. (c) Applicable Hourly Rates: Fees for any additional services covered by the Supplemental Tax Advisory Engagement Letter will be based on the hours incurred and the level of personnel involved. The hourly rates, subject to periodic adjustment, that PwC professionals will charge pursuant to the Supplemental Tax Advisory Engagement Letter are as follows: 5
Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 6 of 8 Hourly Billing Rates Personnel Classification 2012 Integrated Tax Advisory Audit EL EL National Office $850 $850 Assurance/Tax/Risk Assurance Partners $838 $650 Director $515 $530 Bankruptcy Specialist Director $634 $640 Senior Manager $430 $430 Manager $298 $330 Bankruptcy Specialist Manager $492 $490 Senior Associate $235 $300 Bankruptcy Specialist Senior Associate $406 $410 Associate $157 $200 The hourly rates set forth above are PwC s applicable hourly rates for the work of its professionals and staff members for the engagements set forth in the Supplemental Tax Advisory Engagement Letter. The hourly rates reflect PwC s normal and customary billing practices for engagements of this complexity and magnitude. PwC s hourly rates are subject to periodic adjustment from time to time in accordance with PwC s established billing practices and procedures. PwC will provide notice of any changes to its hourly rates within ten business days thereof to the U.S. Trustee and any statutory committee appointed in this case and file such notice with the Court. (d) Additional Services: Fees for any additional services covered by the Supplemental Tax Advisory Engagement Letter will be based on the hours incurred and the level of personnel involved. To the extent that the Debtor requests that PwC perform additional services not contemplated by the Supplemental Tax Advisory Engagement Letter or directly related to services detailed in the Supplemental Tax Advisory Engagement Letter, the Debtor shall seek further application for approval by the Court for any such additional services, and such application shall set forth, in addition to the additional services to be performed, the additional fees sought to be paid. (e) Expenses: In addition to any fees that may be paid to PwC hereunder, PwC will bill the Debtor, and the Debtor will reimburse PwC for its reasonable out-ofpocket expenses, any applicable sales, use or value added tax, and PwC s internal per ticket charges for booking travel. IV. RELIEF REQUESTED 12. By this Supplemental Application, the Debtor requests the entry of the Proposed Order, expanding the scope of the Debtor s employment and retention of PwC as tax advisors to the Debtor, nunc pro tunc to August 15, 2013, pursuant to the terms and 6
Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 7 of 8 conditions of the Supplemental Tax Advisory Engagement Letter and subject to the terms of the Initial Retention Order 13. The Debtor has selected PwC to provide the services under the Supplemental Tax Advisory Engagement Letter because, as set forth more fully in the Initial Retention Application, PwC is a well-respected and experienced professional accounting firm. PwC possesses extensive expertise in the preparation of tax returns that will be useful to the Debtor, and has indicated a desire and willingness to act in this Chapter 11 case and render additional necessary professional services as the Debtor s tax advisor (including the preparation of its tax returns for the tax year ending December 2012). Furthermore, PwC LLP has developed institutional knowledge concerning the Debtor s business practices relevant to the ongoing and anticipated tax advisory services to be provided by PwC LLP. 14. The Debtor believes that the fee and expense structure contained in the Supplemental Tax Advisory Engagement Letter appropriately reflects the nature of the services to provided thereunder, and is consistent with, and typical of, arrangements entered into by PwC and other tax and auditing firms with respect to rendering comparable services for clients similar to the Debtor, both in and out of Chapter 11. The terms of the Supplemental Tax Advisory Engagement Letter are reasonable terms and conditions of employment and should be approved by the Court under Section 328(a) of the Bankruptcy Code in light of: (a) industry practice; (b) market rates charged for comparable services both in and out of the Chapter 11 context; (c) PwC s substantial experience with respect to such tax preparation and advisory services; and (d) the nature and scope of work anticipated to be performed by PwC in connection with this Chapter 11 case. 7
Case 12-36187 Document 2540 Filed in TXSB on 09/12/13 Page 8 of 8 V. NOTICE 15. Notice of this Motion will be provided in accordance with the Court s Order Establishing Notice Procedures [Dkt. No. 132]. WHEREFORE, the Debtor respectfully requests that the Court (a) enter the Proposed Order, expanding the scope of the employment and retention of PwC as the Debtor s tax advisor, nunc pro tunc to August 15, 2013, pursuant to the terms and conditions of the Supplemental Tax Advisory Engagement Letter and subject to the terms of the Initial Retention Order, and (b) grant such other and further relief as may be just and proper. Dated: September 12, 2013 Respectfully submitted, MAYER BROWN LLP By:/s/ Charles S. Kelley Charles S. Kelley Attorney-in-Charge State Bar No. 11199580 Southern District of Texas Bar No. 15344 700 Louisiana Street, Suite 3400 Houston, TX 77002-2730 Telephone: 713 238-3000 Facsimile: 713 238-4888 -and- Craig E. Reimer (admitted pro hac vice) Joshua M. Grenard (admitted pro hac vice) 71 South Wacker Drive Chicago, IL 60606 Telephone: 312 782-0600 Facsimile: 312 701-7711 ATTORNEYS FOR THE DEBTOR AND DEBTOR-IN-POSSESSION 8
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Case 12-36187 Document 2540-1 Filed in TXSB on 09/12/13 Page 2 of 6 IN THE UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: ATP Oil & Gas Corporation, Debtor. Chapter 11 Case No.: 12-36187 ORDER AUTHORIZING THE EMPLOYMENT AND RETENTION OF PRICEWATERHOUSECOOPERS LLP AS THE DEBTOR S INDEPENDENT AUDITORS AND TAX ADVISORS Upon consideration of the supplemental application (the Supplemental Application ) 1 of the Debtor for entry of an order pursuant to 11 U.S.C. 327 and 328 and Rule 2014 of the Federal Rules of Bankruptcy Procedure for entry of an order expanding the scope of the Debtors employment and retention of PricewaterhouseCoopers LLP pursuant to the terms and conditions of the Supplemental Tax Advisory Engagement Letter with respect to certain tax advisory services to be provided to the Debtor by PwC and subject to the terms of the Initial Retention Order (all as more fully set forth in the Supplemental Application), and all exhibits and attachments to the Supplemental Application; and upon consideration of the Brady Declaration, and all proceedings before the Court related to the Initial Retention Application and the Supplemental Application; and the Court having found that (i) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; (ii) this is a core proceeding pursuant to 28 U.S.C. 157(b); (iii) venue is proper in this Court pursuant to 28 U.S.C. 1408 and 1409; (iv) the Supplemental Application is in full compliance with all applicable provisions of the Bankruptcy Code, Bankruptcy Rules, Local Bankruptcy Rules of the Southern District of Texas, and orders and procedures of this Court; (v) the PwC Professionals are qualified to represent the 1 All capitalized terms not otherwise defined herein shall have the meanings ascribed such terms as set forth in the Supplemental Application.
Case 12-36187 Document 2540-1 Filed in TXSB on 09/12/13 Page 3 of 6 Debtor s estate under Section 327 of the Bankruptcy Code; (vi) the terms of PwC s employment have been disclosed and are reasonable under the circumstances; (vii) proper and adequate notice of the Supplemental Application, the deadline to file any objections to the Supplemental Application, and any hearing thereon was given, and no other or further notice is necessary; (viii) the legal and factual bases set forth in the Supplemental Application establish just cause for the relief granted herein; and (ix) the relief sought in the Supplemental Application is in the best interests of the Debtor and its estate; and after due deliberation and sufficient cause appearing therefore, it is hereby ORDERED THAT: 1. The Supplemental Application is GRANTED to the extent provided for herein. 2. Subject to the terms of the Initial Retention Order, the Debtor is authorized, pursuant to sections 327(a) and 328(a) of the Bankruptcy Code and Bankruptcy Rules 2014(a) and 2016(a) to employ, retain and compensate PwC LLP as tax advisors to the Debtors, nunc pro tunc to August 15, 2013, in accordance with the terms and conditions set forth in the Supplemental Tax Advisory Engagement Letter. 3. Except as limited and modified by this Order, the terms of the Supplemental Tax Advisory Engagement Letter are approved in all respects. 4. Consistent with the terms of the Supplemental Tax Advisory Engagement Letter, PwC shall be, and hereby is, authorized to perform the following enumerated services: (a) (b) Provide tax return preparation services with respect to income tax returns of the Debtor and certain of its subsidiaries and/or affiliates identified in Exhibit I to the Tax Advisory Engagement Letter; Provide tax advisory and planning services related to the Debtor s tax attributes, to include conducting net operating loss limitation analysis, assessing the impact of cancellation of debt on the Debtor s tax attributes and tax basis, and evaluating the Debtor s ability to qualify for various tax provisions available in bankruptcy situations; and 2
Case 12-36187 Document 2540-1 Filed in TXSB on 09/12/13 Page 4 of 6 (c) Provide additional services not specifically set forth in the Tax Advisory Engagement, including (i) providing advice, answers to questions, and/or opinions on tax planning or reporting matters, including research, discussions, preparation of memoranda, and attendance at meetings relating to such matters, as mutually determined to be necessary and (ii) providing advice and/or assistance with respect to matters involving the Internal Revenue Service or other tax authorities on an as-needed or as-requested basis. 5. PwC shall use its best efforts to avoid any duplication of services provided by any of the Debtor s other retained professionals in this Chapter 11 case. 6. PwC shall file interim and final fee applications for allowance of its compensation and reimbursement of its expenses with respect to services rendered in this Chapter 11 case with this Court in accordance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, the U.S. Trustee Guidelines and any applicable orders of this Court; provided, however, that PwC shall be excused from keeping time records for services rendered in one-tenth (0.1) of an hour increments, and instead PwC shall include in its fee applications: (a) a narrative summarizing each project category and the services rendered under each project category; (b) as an exhibit to each fee application that PwC files in these Chapter 11 cases, a summary, by project category, of services rendered to the Debtor, which identifies each professional rendering services, the number of hours expended by each professional, and the amount of compensation requested with respect to the services rendered by each professional; and (c) reasonably detailed records of time in half-hour (0.5) increments (with PwC to use its best efforts to avoid rounding any of its time-up to the nearest half-hour increment), describing the services rendered by each professional and the amount of time spent on each date. 7. All fixed fee compensation payable to PwC pursuant to the Supplemental Tax Advisory Engagement Letter is hereby approved pursuant to Section 328(a) of the Bankruptcy Code; provided, that, notwithstanding anything to the contrary in this Order, the Initial Retention 3
Case 12-36187 Document 2540-1 Filed in TXSB on 09/12/13 Page 5 of 6 Order, the Supplemental Application, or the Supplemental Tax Advisory Engagement Letter, any applications for payment of compensation in excess of the fixed-fee amounts set forth in the Supplemental Tax Advisory Engagement Letter shall be subject to review and Court-approval under Sections 330 and 331 of the Bankruptcy Code. 8. Neither the entry of this Order nor anything to the contrary herein shall preclude the U.S. Trustee from objecting to any fees billed by PwC bankruptcy retention and billing advisors (as described in further detail in Paragraph 11 of the Supplemental Application). 9. In the event that the rates of compensation for the services increase from the rates disclosed for services in the Supplemental Application or the Supplemental Tax Advisory Engagement Letter, PwC will provide notice of such increased rates to the Debtor, the U.S. Trustee and any statutory committee appointed in this Chapter 11 case, and file such notice with the Court, within ten (10) business days prior to the effective date of such increases. 10. Except as otherwise provided herein, nothing in this Order is intended or shall be deemed to amend, modify or otherwise affect the Initial Retention Order, and the Initial Retention Order shall remain in full force and effect. 11. To the extent that the provisions of this Order are inconsistent with the provisions of the Supplemental Application or the Supplemental Tax Advisory Engagement Letter, the provisions of this Order shall govern. 12. The Debtor and PwC are authorized and empowered to take all actions necessary to effectuate the relief granted pursuant to this Order in accordance with the Supplemental Application and the Supplemental Tax Advisory Engagement Letter. 13. This Order is immediately effective and enforceable, notwithstanding the possible applicability of Bankruptcy Rule 6004(h) or otherwise. 4
Case 12-36187 Document 2540-1 Filed in TXSB on 09/12/13 Page 6 of 6 14. This Court shall retain jurisdiction with respect to all matters arising or related to the implementation of this Order. SIGNED this day of, 2013. MARVIN ISGUR UNITED STATES BANKRUPTCY JUDGE 5
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