Since 2015, bankruptcy courts have seen a steady flow of oil and gas bankruptcies — totaling around $106.8 billion in aggregate debt — with no slowdown in sight.
These cases bring along the complex transactions common in the industry, governed by differing state laws and raising novel issues under the Bankruptcy Code. One such issue is the exclusion of property of the estate a debtor’s interest in oil and gas that has been transferred under a “farmout agreement.” But what constitutes a farmout varies according to state law and the agreement itself. Whether the interests underlying these agreements are property of the estate has important consequences in a bankruptcy case.
In an article for the American Bankruptcy Institute's Bankruptcy Litigation Committee, Tim Anzenberger and Alex Bondurant explore the issue of the exclusion of farmout agreements from property of the estate in a bankruptcy.