Black Elk Energy inks DIP financing, plugging and abandonment deal

By Caroline Salls

Pittsburgh, Feb. 9 – Black Elk Energy Offshore Operations, LLC requested court approval to obtain $7.75 million in post-bankruptcy financing, enter into a contract with Montco Oilfield Contractors, LLC and fund a global plugging and abandonment plan related to decommissioned wells (P&A plan), according to a motion filed with the U.S. Bankruptcy Court for the Southern District of Texas.

“Through this motion, the debtor seeks approval of a pathway to resolution of its financing needs as well as substantially all of its operated P&A liabilities,” the company said in the motion.

Black Elk called the proposed financing and plan “the last, best chance for a positive result for the debtor’s estate and resolution of its environmental liabilities.”

The company said the P&A plan provides for the plugging and abandonment of substantially all of its operated P&A liabilities and provides enough excess collateral to support the proposed DIP financing, which is sufficient to fund Black Elk through implementation of the P&A plan and an expedited Chapter 11 plan process.

The P&A plan is based on an amended and superseded Montco contract, which provides for the plugging and abandonment on a turnkey basis of substantially all of Black Elk’s operated P&A liabilities.

The company said Montco has agreed to look to release bond collateral and some escrow collateral for payment for its P&A activities.

Specifically, Black Elk said Montco has agreed to wait until site clearance is received for any property before receiving payment.

According to the motion, the proposed DIP financing to be provided by Montco will be sufficient to fund Black Elk through a Chapter 11 plan process.

“Upon entry of the initial order and the release of the first round of funding, the debtor’s liquidity and affairs will stabilize,” the company said in the motion.

“This stability will provide the debtor with a window of time to work with other parties-in-interest to finalize consent to the P&A plan and to formulate the terms of a liquidating plan, which will allow the debtor to emerge from this Chapter 11 case.”

“The P&A plan provides a clear path to recovery for all parties in this case while remedying substantially all of the debtor’s operated P&A liability.”

Interest on the DIP financing will be 7½%. The facility will mature on May 1.

A total of $1 million of the financing will be available on an interim basis.

A hearing is scheduled for Feb. 10.

Black Elk Energy is a Houston-based oil and gas company that filed for bankruptcy on Sept. 15. The Chapter 11 case number is 15-34287.

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