EXCO Resources – BHP Seeks Segregation, Final Adjudication of $9.3 million in Production Proceeds

October 10, 2018 – BHP Billiton Petroleum (KCS Resources) (f/k/a KCS Resources) and BHP Billiton Petroleum Properties (together. “BHP”) filed with the Court a motion for adequate protection against the Debtors [Docket No. 1128]. The motion explains, “EXCO Operating served as operator of certain properties in which BHP owned royalty and working interests (‘BHP’s Interests’). In the ordinary course of business, the Debtors received on a monthly basis proceeds from the sale of hydrocarbons that are attributable to BHP’s Interests. It is well established under applicable law that these production proceeds, although in the possession of the Debtors, are property of BHP and not property of the Debtors’ estates. However, through late 2016, the Debtors placed BHP’s Interests and at least $9,317,2273 in production proceeds that are presently due to be distributed to BHP in ‘suspense’ status due to a title dispute (between BHP and a third party) relating to certain of BHP’s Interests (‘BHP’s Suspended Proceeds’). However, even after BHP resolved the title dispute through the Devon Settlement and provided evidence of such resolution to the Debtors, the Debtors improperly refused to release BHP’s Suspended Proceeds….Further, with the filing of the Debtors’ Plan, there is now a substantial risk that the Debtors intend to imminently convert BHP’s Suspended Proceeds by distributing the proceeds to satisfy the claims of other creditors. Thus, BHP is entitled to adequate protection—specifically, the segregation of such funds pending a final adjudication of BHP’s rights to such funds—in order to protect BHP’s interests and prevent the Debtors from using the proceeds in a way that makes them untraceable.”