MDC Reeves Bankruptcy

I have a lot of Wells in different sections that mdc Reeves is the operator. I have been receiving royalty checks each month. I received notification that they are filling chapter 11 bankruptcy. What does this mean for those of us that own mineral.

Should have no effect on mineral owners. MDC will either reorganize its debt with it’s creditors or will be sold off to another company that will become the operator. Nothing that you need to do. You should continue to receive royalty checks.

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Todd- Not really that simple.

I have multiple wells that MDC is operator… what do think will happen now. They have been a slow pay for the last 6 months

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John19, it looks like MDC filed Chapter 11 in federal court in Delaware a week or more ago.

From the little I’ve found on line it looks like this may not be one of those smooth, prepackaged reorganizations like some companies manage. Apparently some of the unsecured creditors are fighting MDC’s petition and making claims of mismanagement.

Appreciate if you would post an update if you get further notices. As a mineral owner in a MDC unit where they recently drilled a first well but apparently haven’t fracked yet it may be hard to figure out our status and what to anticipate.

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Mr. Caldwell,

What do you suggest we do as mineral owners? Do we just sit tight or do we need to retain our own legal counsel?

Thank you.

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I have not received royalty check in over 2 months. I called and they had no time table as to when they would send anymore out. What do you do?

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Hi John19, Here is what I received at the end of November. I was thinking that they would send out a check on December 31st, like they did last year. I did send a follow up email just a few minutes ago. If I hear anything else I will post again. -MaryB

"As a part of the chapter 11 filing MDC was required to void all outstanding checks. However, we will resume making Royalty owner payments in early December and will stay current with royalty owner payments going forward.

"As a part of the filing MDC is drafting a royalty owner motion for the courts. That motion will allow MDC to catch up any outstanding royalty payments, including the check that did not clear, and will allow MDC to resume paying royalties monthly going forward. "This temporary delay is administrative only and a part of the bankruptcy process We are confident that you will be caught up in December.

Do not hesitate to reach out if you have any questions."

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It doesn’t look like this bankruptcy is likely to be resolved any time soon. A big real estate development the owner/CEO of MDC has underway in New York City that doesn’t involve MDC, but includes some of the same lenders, seems to be making things worse in Reeves County.

At a hearing on the 16th the judge denied motions that had been filed by MDC’s lenders trying to take over and apparently let MDC temporarily continue operating. But that original judge then resigned from the case and a new one was appointed. The next hearing is scheduled for December 30th and the lenders have filed motions for subpoenas and interrogatories to start early next month.

Hopefully MDC will be paying royalties again soon but when they can drill, or frack wells they’ve already finished, is another question.

This is an fyi. My wife has royalty interest for wells in Reeves county, via MDC. Just a few days ago, she received a check for royalty payments for one well, after virtually nothing all last year. (This is a well that was drilled back in the fall of 2018, with production starting 4/2019.) She sent them emails with questions, including why payments for production for some other months were not included in the check. Moreover, she also has interest in a 2nd well they drilled and has not so far received a division order for it.

They responded within a day saying that they are having to go through the US Treasury court system (Jan. 20th) to get approval to release other funds to royalty owners that have not been paid. Moreover they are saying that division orders for the 2nd well she has interest in should go out soon. After that they will seek approval to disperse funds for that well.

I might say that MDC folks have given all kinds of excuses to my wife over the past year. She was told division orders were going out early last fall. Of course that did not happen; and it was before the bankruptcy filing. To say that I am skeptical about what they say is an understatement.

The silver lining here is that for my wife and her family members, at least some funds went out in the face of this bankruptcy stuff.

An additional note: over time I have usually relied on the Texas Railroad Commission website for various documents and stats about drilling and production activity. Perhaps old news to quite a few of you, but I should like to share another web link at the Texas Comptroller website.

https://mycpa.cpa.state.tx.us/cong/loginForward.do?phase=check

This page allows you to log in if you have registered. But public information does not require a login. Over on the left you can click on the link “Lease Drop - Crude Oil” that takes you to another page where you put in information such as the drilling permit number and the months you wish to have data for. If you do that, the query system comes back with production stats by month for your well, such as Taxable Barrels and Net Value. These figures should reconcile with production and sales stats from payment stubs for checks you receive. I was advised by an oil company president that this site is a better one to use to check your figures. In thinking about it, it had better be accurate on the part of oil producers/sellers in that it is the basis of the taxes they pay to the state.

I also note that there is also a page you can visit to check natural gas stats. On the URL link I cited, another link “Lease Drop-Natural Gas” does that.

I would be interested if other of you out there have received checks from MDC lately.

Steven, appreciate what you shared. An MDC well we have interest in finished drilling right before their bankruptcy filing and apparently they haven’t been able to complete it.

Supposedly MDC lined up new financing that could payoff their previous loans but the original lenders are trying to keep that from happening and have petitioned the court to appoint a bankruptcy trustee to run the company. On the 18th the judge signed an interim order allowing MDC to continue spending the cash they have available to pay royalties and other approved expenses. A hearing on February 4th will decide on making that final, and what is called an omnibus hearing, which I assume means it covers the whole case, is scheduled for February 24th.

You might be interested in checking out the link below to payment schedules MDC filed with the court last week. Starting on about page 12 it lists all the royalties and other payments they’ve made since August.

https://cases.stretto.com/public/X041/10065/PLEADINGS/1006501162080000000024.pdf

Steven1 -We have a small interest in a Reeves County Well operated by MDC Reeves, and had been receiving monthly payments from 2018 through 8/19 production (a check dated 9/30). They stopped, but just resumed with a check for 11/19 production.
The weird thing is I used your Texas Comptroller link to research that well, and it returned with “no records found”. Not sure what that means - you?

Hi Lee2. Sorry to be tardy in responding, as I have been messing around with other things.

Not exactly sure what is going on with your query. But, here are some thoughts:

  1. That website is a bit quirky. When I click on it, at first a blank page comes up. Doing some more clicking I do get to links going down the left side of the page. They ask for login, but public information does not require such.
  2. If I go over to the left side link “Lease Drop Crude Oil”, another page comes up showing options for queries.
  3. In my case, I enter the drilling permit number and start date and end date. For example, I entered 1809 as the start date (Sept 2018), and 2001 for the end date.
  4. After doing that, stats popped up for the months where production was reported.
  5. Now having said that, all I can think of is to double check your drilling permit number, or perhaps enter something else like the lease number.

If that does not work, then perhaps you will need to go to the Texas Railroad Commission website and see what you can find there.

I hope this helps. Best of luck,

Regards,

Steve

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At a hearing today in the federal bankruptcy court in Delaware a settlement agreement was announced that will end the lender petitions to take over MDC or have the court appoint a trustee to run it. A new board committee headed by CEO Mark Siffin and including two new independent directors will taken over operation of the company. Final approval of the settlement won’t be until a hearing is held February 24th but the company, lenders and major lien holders have stipulated their agreement with it. Only hold out at this point appears to be the Justice Department’s bankruptcy monitor that had joined the original lenders petition to remove the CEO and so far hasn’t given their blessing to the settlement.

The court also signed another interim order today allowing MDC to make capital expenditures to frack and complete their Just Call Me Ken well they had finished drilling right before the bankruptcy was filed. It’s been sitting due to frozen capex and facing lease deadlines.

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I am a royalty owner for the Secretariat 10 well operated by MDC Reeves Energy LLC. We’ve been receiving royalty checks throughout 2019. There has been a couple very strange occurrences and I’d love to know if other owners experienced this as well.

We received a “zero remittance” letter 10/15/2019 which seems to deducted royalty payments for 03/18 and 04/18. There was no payment for 10/18 due to these deductions which have absolutely no explanation.

The most recent check stub for 1/20 shows 2020 totals to be almost double the amount the check was issued for. (There hasn’t been any other checks issued in 2020.)

I’ve also tried contacting MDC. No one answers the phone, the general voicemail is full and the emergency contact phone prompt, promptly hangs up on the caller.

Anyone else had similar check stubs or experiences with MDC?

Thanks in advance!

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Look for conferences, etc. that discuss this topic. The more information that royalty owners share, the better we can prepare for bankruptcies.

Justin, I was hoping someone currently receiving royalties from MDC would respond to your question. The family interest I’m involved with is waiting on completion of an MDC well they finished drilling in October right when their bankruptcy was filed.

Based on the court filings I’ve followed I’m thinking the accounting issues you’re talking about all relate to the bankruptcy, but I’ve seen posts talking about issues folks had with MDC long before that.

In November the bankruptcy judge started approving temporary orders lasting 30 days allowing MDC to pay their monthly operating expenses, including royalties. They are now working under the fourth monthly order like that and for the first time are also being allow to make some specific capital expenditures. With the pending settlement that’s discussed above maybe their operations will start getting back to normal but it may take a while.

If you haven’t already I’d check the monthly sales revenues MDC has reported for your lease on the State Comptroller’s website. If you don’t know about it search CONG using the spy glass symbol at the top of this page and I think you’ll find several discussions on how to use it.