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Debt Management Law News

December 2, 2009

Bankrupt, TXCO Resources asset sale timetable set

San Antonio-based TXCO Resources Inc., an oil and gas exploration and production company now operating in bankruptcy, Tuesday released the timetable for the sale of most of its assets and an alternative plan should the asset sale fall through.

TXCO Resources said in a prepared statement it has scheduled a Dec. 16 bankruptcy hearing for approval of the disclosure statement explaining a proposed Chapter 11 plan calling for a $223 million cash assets sale to Newfield Exploration Co.

If the sale-based plan isn't approved or Houston-based Newfield doesn't complete the purchase, the disclosure statement presents an alternative plan in which secured lenders and other creditors will be given new stock so the company can emerge from reorganization before financing for the Chapter 11 case expires.

The deadline for submitting an offer better than Newfield's is Jan. 6. Newfield is buying most of the assets, TXCO said. The remainder will be sold to unsecured creditors.

Newfield isn't buying drilling rigs, offshore properties, properties in Oklahoma and specified nonoperated properties. The Newfield contract requires a confirmation order approving the plan by Jan. 31, with completion of the sale not later than Feb. 26.

The disclosure statement states the sale-based plan should enable full payment of $32 million financing the reorganization along with the secured revolving credit and term loan. The disclosure statement has blanks where the amounts of the revolving credit and term debts will be inserted later, the company said.

The disclosure statement also states the sale also should pay “most” of the claims held by senior mineral lien claimants. The recovery by unsecured creditors is projected to be “significant,” TXCO said.

If the sale-based plan isn't confirmed, TXCO will pursue confirmation of the alternative plan under which most of the new equity will be given to secured creditors, along with new secured debt.

In the alternative plan, unsecured creditors would be offered 5 percent in cash, or 2.5 percent of the new stock.

TXCO filed under Chapter 11 bankruptcy in May, formally listing assets of $358 million and debt of $331 million, including $166 million in secured claims.

The company said at the time that a series of events led to a liquidity crunch and impaired its ability to operate. TXCO was caught in a cash crunch starting in 2008 after it launched an ambitious drilling program that was followed by a collapse of oil and natural gas prices and then a tightening of credit markets.The company has 720,000 net acres under lease in Texas, Oklahoma and the Gulf of Mexico with proven oil and gas reserves.

Sometimes, debt can be overwhelming, and bankruptcy becomes necessary.
Bankruptcy can sometimes be difficult. If you are considering bankruptcy, contact the Houston bankruptcy lawyers of Weston & Associates, PLLC at 713-623-4242

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