Ultra Petroleum debtor to buy gathering system under lease settlement

By Caroline Salls

Pittsburgh, June 23 – Ultra Petroleum Corp. requested court approval of the $18 million purchase of a gathering system and the related settlement of a dispute regarding the proposed rejection of a lease between debtor Ultra Wyoming LGS LLC and Pinedale Corridor, LP, according to a motion filed Monday with the U.S. Bankruptcy Court for the Southern District of Texas.

The company said Ultra Wyoming and Pinedale entered into a purchase and sale agreement on Dec. 7, 2012 under which Ultra Wyoming sold Pinedale facilities and pipelines located in Sublette County, Wyo., that gather liquids from wells operated by Ultra Resources in the Pinedale Anticline field, as well as related personal property, rights of way and easements.

The parties entered into the lease agreement on Dec. 20, 2012. Under that agreement, Pinedale leased the gathering system to Ultra LGS in exchange for rental payments totaling at least $20 million per year, subject to inflation and volume adjustments, through 2027.

Ultra LGS filed a motion to reject the Pinedale lease agreement on May 15, stating that using the gathering system under the terms of the Pinedale lease “is burdensome.” Ultra said it could reject the lease, tie into the debtors’ existing system and dispose of liquids by truck in the interim.

The company said the costs related to the rejection are outweighed by more than 10 times by the lease obligations.

Under the proposed settlement, the Ultra debtors will purchase the gathering system for $18 million in exchange for Pinedale’s withdrawal of its lease termination objection and consensual termination of the lease.

The purchase is expected to close by June 30.

A hearing is scheduled for June 25.

Ultra Petroleum is a natural gas and oil exploration, development and production company based in Englewood, Colo. The company filed bankruptcy on May 14 under Chapter 11 case number 20-32631.

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