SNL Financial discussed the midstream gathering agreements arising from the Quicksilver Resources Inc. bankruptcy with Partner John P. Melko, chair of the Firm’s financial restructuring and reorganization practice group.
In early April, Quicksilver withdrew its court motion to reject its gathering agreements with Crestwood Equity Partners LP. BlueStone Natural Resources II LLC, who had just teamed up with Natural Gas Partners to buy Quicksilver’s U.S. oil and gas assets, then established gathering and processing pacts with Crestwood. As a result, industry professionals believe that these of out-of-court contract restructurings will start to become a common place practice.
According to Mr. Melko, investors are questioning whether covenants and field dedication agreements that support midstream revenue and asset investments are enforceable. He also notes that midstream companies would be unwilling to construct gathering and transportation lines without credit support, making field development more expensive for producers.
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