Castex Energy & Castex Offshore

CASTEX HAS FILED FOR BANKRUPTCY AGAIN

After successfully exiting its 2017 bankruptcy proceeding, the pandemic has been too much for Castex to overcome. They filed bankruptcy again on February 26, 2021 for the following entities:

• Castex Energy 2005 Holdco, LLC (21-30710)
• Castex Energy 2005, LLC (21-30711)
• Castex Energy Partners, LLC (21-30712)
• Castex Offshore, Inc. (21-30713)

The Debtors have indicated that they reached a preliminary agreement with their secured creditors and intend to propose a Chapter 11 Plan no later than March 8th, 10 days after their bankruptcy filing. They plan to file detailed financial information, including their schedules and statement of financial affairs, by March 22nd. By the end of this month, we should know a lot more about the future of the Debtors and prospects for creditor repayment.

The Court has set the Debtors’ 341 meeting, also known as a meeting of creditors, for 4/1/2021 at 1:30 pm, Prevailing Central Time. The meeting presents an opportunity for creditors to ask questions of the Debtors’ representative about the bankruptcy filing and plan going forward. It will be held by telephone.

CASTEX FILED ITS PROPOSED PLAN ON MARCH 8TH

The Debtors have revealed that they hope to use the bankruptcy court to effectuate “an orderly liquidation of its assets.” To that end, they filed a proposed plan on March 8, 2021. The plan proposes to deliver certain of the Debtors’ assets to their secured creditors and to dump the remainder of the assets into a Liquidating Trust for the benefit of creditors. The Liquidating Trust will be charged with liquidating the Debtors’ remaining assets, prosecuting claim objections and certain avoidance actions, and distributing money to creditors.

The Plan contains certain provisions that are out of the ordinary and could negatively impact unsecured creditors. First, the Plan provides for the resolution of the Debtors’ plugging and abandonment or decommissioning obligations (“P&A Claims”) after confirmation of the Plan. This means that the creditors cannot even determine the extent of the claims against the Debtors before confirmation. Second, the Plan designates many creditor claims, which are otherwise legal and valid, as “disputed,” meaning that they are entitled to no distributions at all unless the Bankruptcy Court intervenes.

It is also unconventional that the Debtors have filed these documents without providing other financial information. The Debtors are not required to produce financial schedules until March 22nd. Creditors do not get to question the Debtors’ representative at a 341 meeting until April 1st. Creditors have through April 21st to file proofs of claim. Debtors state they will disclose payments made in the 90 days prior to the bankruptcy, which should be included in the March 22nd filing, in the Plan Supplement, which is not due until 10 days prior to the Confirmation Hearing.

As a creditor, you have a right to these and all other details of the Plan. You likely have a right to vote whether to accept or reject the Plan, and you have a right to know what the vote will mean for you. Reach out to us with any questions.

NEW INFORMATION FROM MARCH 2ND HEARING

At the first day hearing before the Court on March 2, 2021, the Debtors disclosed some additional information. The major revelation is that the Debtors have proposed a very short timeline for plan confirmation because they simply do not have enough cash to last longer than approximately 90 days. So, they are going to explore options, but anything they will do is going to have to be done quickly.

The Debtors also got permission to require creditors to file proofs of claim no later than April 21st to accommodate their shortened timeline. So, creditors must act quickly to assert and protect their rights. The Debtors’ disputes with its former operator, CEI, and with their surety bond company, will determine creditor payout. Debtors believe that there will be at least $1.75 million for payout to unsecured creditors, but there could be up to $28 million in unsecured claims.

The Debtors also have a judgment of $69.5 million against Apache Corporation, which they state is their most valuable asset. However, Apache has appealed that judgment and the Debtors cannot collect until the Texas Fourteenth Court of Appeals rules on the matter. Additionally, under the proposed plan, the Debtors intend to keep the rights to collect this judgment for themselves and their secured creditors.

New information is coming in daily. The latest information is available to the public from the Debtors’ claims agent: Donlin, Recano & Company, Inc. Click here to visit the Donlin page for the Castex bankruptcy. If you have any questions, want more information, or want documents from the Castex Energy case sent to you for free, please reach out to PRLT.