Lexis Nexis Clarks' Oil and Gas Financing Under the UCC: Perfecting and Enforcing Security Interests
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Plummeting oil and gas prices are causing major shifts in the market for oil and gas project financing. The fluctuating nature of oil & gas collateral is creating a whole new world of lending risk. While Article 9 security interests will continue to be part of financing packages, lenders need to be even more careful when documenting and perfecting security interests and also ready to meet the challenges of default. The nuts and bolts rules governing loan transactions secured by oil & gas collateral are found in Article 9 of the Uniform Commercial Code. Article 9's oil and gas provisions have never been more relevant throughout the life of the transaction.
Now is the time for lenders to do their due diligence by reviewing existing loan documentation and shoring up security interests where necessary. Understanding Article 9's default and enforcement provisions has never been more important. Bankruptcy proceedings involving overleveraged producers and service providers will be hitting the courts in the coming months. Meeting the challenges of bankruptcy is crucial.
Clarks' Oil and Gas Financing Under the UCC is an invaluable resource for anyone who deals with security interests or liens in oil and gas collateral. Commercial banks, private lenders, mineral estate owners, operators, contractors, and the attorneys who represent them can all benefit. The book includes concise analysis of these topics and more:
• Perfecting security interests in oil and gas collateral and related personal property
• Oil and gas law fundamentals and case law
• Default rules including UCC foreclosure sales
• Defending security interests in bankruptcy
• The interplay of Article 9 security interests and statutory oil and gas liens
• Fracking operations: regulatory and legal challenges
• Secured financing in Indian Country
Clarks' analysis is practical and offers state of the art tools for mastering and staying on top of the subject area including:
• How the structure of an oil & gas financing works
• A checklist summarizing filing and perfection requirements to facilitate loan documentation audits
• Glossary of relevant terms
The eBook is a reprint of Chapter 13 of the Clarks' publication, The Law of Secured Transactions Under the Uniform Commercial Code, and it links to additional resources on Lexis+®, including relevant chapters from The Law of Secured Transactions Under the Uniform Commercial Code, relevant articles from Clarks' Secured Transactions Monthly, annotated UCC provisions, the bankruptcy code, other federal and state statutes, and law review articles.
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Table of contents
§ 1.01. Structure of Oil and Gas Finance
[1] Introduction
[2] Basics of Oil and Gas Secured Financing
[3] Fractionalized Oil and Gas Interests
[4] Role of Article 9
§ 1.02. Interests in Unextracted Minerals: Personal Property or Real Estate?
[1] Introduction
[2] Mineral Estate and Royalties
[3] Leasehold Estate
[4] Overriding Royalties and Production Payments
[5] Net Profits Interest
[6] The Point at which Article 9 Kicks in
§ 1.03. Security Interests in Extracted Oil and Gas and Proceeds of Sale
[1] Extracted Oil and Gas
[a] In General
[b] Buyer for Value without Knowledge
[c] Sales to Buyers in the Ordinary Course of Business
[d] Commingled Oil and Gas
[2] Accounts Generated From Sale of the Oil and Gas
[a] In General
[b] The Fullop Case
[c] Division Orders
[3] Security Interests in Oil and Gas Arising after Extraction
[4] Security Interests in Oil and Gas Stored Underground
[5] Factoring Transactions Involving Oil and Gas
§ 1.04. Article 9 Security Interests in Oil and Gas Equipment and Fixtures
[1] Introduction
[2] General Filing Problems
[3] Fixtures
[4] Perfection via Certificate of Title Notation
[5] Enforcement of Security Interests in Equipment
[a] General Principles
[b] Commercially Unreasonable Foreclosure Sales: A Paradigm Case
[c] Commercially Reasonable Foreclosure Sales: A Paradigm Case
[i] The Texas Case
[ii] The Foreclosure Sale
[iii] Choice of Law Governing Enforcement
[iv] Neither Repossession Nor Collateral Clean-up Are Conditions of Foreclosure
[v] Three Tests for Commercial Reasonableness
[vi] Bank's Foreclosure Sale was Commercially Reasonable under New York Law
[vii] Defining Commercial Reasonableness by Contract
§ 1.05. Oil and Gas Pipelines as Transmitting Utilities
§ 1.06. Summary of Filing and Perfection Requirements
§ 1.07. The OCC Booklet on Oil & Gas Production Lending
[1] Introduction
[2] Covered Institutions
[3] Macro-level: Institutional Relevance
[4] Micro-level: Transactional Relevance
[5] Risks Associated with Oil & Gas Production Lending
[6] Risk Management Applied to Transactions In General
[7] Underwriting Standards
[8] Documentation of Collateral and Perfection of Security Interests
[9] Ongoing Monitoring
[10] Expanded Examination Procedures
[11] The OCC's Checklist for Loan Review
[12] Best Practices Check Lists: Oil & Gas Loan Audits
§ 1.08. Enforcing Article 9 Security Interests in Oil and Gas Collateral
[1] Introduction
[2] What Constitutes "Default? "
[3] Cumulative Remedies
[4] Keeping the Guarantor on the Hook
[5] Personal and Real Property Combined
[6] Direct Collection of Receivables
[7] Deficiency and Surplus
[8] Repossession
[9] Commercially Reasonable Disposition
[10] Use of Strong "Standards" Language in the Security Agreement
[11] Notification of Sale
[12] The Need to Hire an Expert to Evaluate the Disposition
[13] Application of Proceeds
[14] Strict Foreclosure
[15] Borrower's Right to Redeem
[16] Sanctions for Creditor Misbehavior
[17] Three Important Safe Harbors for the Foreclosing Creditor
§ 1.09. The Challenge of the Trustee in Bankruptcy
[1] Introduction
[2] The Voidable Preference Problem
[3] Safe Harbors
§ 1.10. Federal Oil and Gas Leases
§ 1.11. The Challenge of the Federal Tax Lien
§ 1.12. The Challenge of the Statutory Lien
[1] Mineral Liens
[a] In General
[b] Persons Entitled to Assert Liens
[c] Property Subject to Mineral Liens
[d] Filing Requirements
[e] Priority and Relationship to Article 9 Security Interests
[2] Oil and Gas Owners' Lien Acts
[3] Unitization Act Liens
[4] State Land Royalty Liens
§ 1.13. Issues Related to Hydraulic Fracturing
[1] Introduction
[2] Fracking Technology and Environmental Concerns
[3] Current Regulatory Landscape
[4] Security Interests in Hydraulic Fracturing Collateral
[5] Threats to Interest Owners and Secured Lenders Related to Hydraulic Fracturing Operations
[a] In General
[b] The Threat of a Moratorium
[c] The Threat of Subsurface Trespass
§ 1.14. Oil and Gas Security Interests in Indian Country
[1] In General
[2] Indian Tribes and Nations and Indian Country
[a] Generally
[b] Tribal Sovereignty and Regulation
[c] Indian Country
[3] Oil and Gas Transactions in Indian Country
[4] Secured Transactions in Indian Country
[a] In General
[b] Implementing a Secured Transactions System
[c] Comparing the MTSTA to UCC Revised Article 9
[d] Perfecting Security Interests: Where to File
[5] The Intersection of the Nonintercourse Act and As-Extracted Collateral
Appendix A- Glossary of Terms
Appendix B- Best Practices Checklists: Oil & Gas Loan Audits
§ App. B.01. Checklists
[1] UCC Perfection & Filing
[2] Loan Documentation
[3] Financial & Maintenance Monitoring
[4] Risk
