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ATP unsecureds set out to pursue fraudulent transfer claims

by Hayley Kaplan  |  Published November 2, 2012 at 1:46 PM
ATP Oil & Gas Corp.'s official committee of unsecured creditors is seeking standing in the bankruptcy of the oil and gas property developer so that it can prosecute certain fraudulent conveyance claims it believed occurred before the company filed for Chapter 11.

Judge Marvin Isgur of the U.S. Bankruptcy Court for the Southern District of Texas in Houston will weigh the panel's request on Nov. 15. The committee filed a motion on Oct. 31, seeking leave, standing and authority to pursue certain fraudulent claims on behalf of the ATP's estate.

The unsecured creditors alleged that over the past four years, ATP and certain unnamed counterparties entered into transactions where royalty, net profit and other similar interests in certain offshore oil and gas leases that were owned by the debtor were cancelled.

The transfers of certain valuable APT assets and royalty interests occurred during a time when ATP was insolvent and didn't have much capital. The counterparties knew or should have known the transactions would have increased ATP's insolvency, the committee alleges. As a result, the panel reasons, the transactions should be probed.

The unsecureds believe Diamond Offshore Co., which is involved in an adversary proceeding with ATP, was one of the counterparties involved in the transfers with debtor. Diamond sued ATP on Oct. 2 in the Houston, alleging ATP has been hoarding cash owed to the drilling contractor.

ATP and Diamond first teamed up on Aug. 4, 2008, signing a deal through which Diamond would drill on offshore oil and gas leases owned by ATP. The two expanded their partnership about a year later, when ATP promised Diamond royalties from the profits derived from the oil and gas it helped extract from ATP's properties. Diamond alleged, however, that ATP hasn't paid its claims.

Meanwhile, the committee said ATP has refused the panel's "demand" to bring the avoidance claims. The panel said it believes the fraudulent conveyances were made outside ATP's ordinary course of business and on terms that were "onerous" to the debtor. ATP has declined to prosecute the avoidance claims in an effort to recover assets for the benefit of its estate.

Founded in 1991, ATP acquires and develops oil and natural gas properties, primarily in the Gulf of Mexico, and has production facilities on the sites. The company also operates through subsidiaries in the United Kingdom portion of the North Sea and in the eastern part of the Mediterranean Sea.

As of Dec. 31, ATP directly held leaseholds on 38 offshore blocks and 49 wells, including 23 subsea wells. About two-thirds of its wells are in the Gulf of Mexico and have reserves of 75.9 million barrels of crude oil equivalent.

ATP blamed its Aug. 17 bankruptcy filing on a liquidity crisis rooted in the aftermath of the BP plc oil spill in the Gulf of Mexico on April 20, 2010.

Debtor counsel Charles S. Kelley of Mayer Brown LLP did not respond to requests for comment Friday. Nor did James Matthew Vaugh of Porter Hedges LLP, who is legal counsel to the committee. Gerard H. Uzzi of Milbank, Tweed, Hadley & McCloy LLP also provides legal counsel to the unsecured creditors. Diamond's counsel is Berry D. Spears and Steve A. Peirce of Fulbright & Jaworski LLP and Paul J. Dobrowski of Dobrowski, Larkin & Johnson LLP.
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