EXCO Resources – Creditor Enterprise Asks Court to Abstain From Deciding Value of Proofs of Claim Pending Outcome of Litigation

October 5, 2018 – Enterprise Products Operating LLC (“EPO”) and Acadian Gas Pipeline System (“Acadian,” and together with EPO, “Enterprise”) filed a motion requesting that the bankruptcy Court abstain from deciding matters which would impact the value/treatment of its proofs of claim pending resolution of long-standing litigation in a Texas state court.  [Docket No. 1119]. The motion explains, “Enterprise requests that the Court permissively abstain under 28 U.S.C. section 1334(c)(1) from deciding the Claim Objection or liquidating the amount of Enterprise’s proofs of claim, which are premised on the pending litigation in Cause No. 2016-60848, Enterprise Products Operating LLC, et al. v. EXCO Operating Company, LP, et al. (the ‘State Court Case’) in the 157th Judicial District Court of Harris County, Texas (the ‘State Court’) before the Honorable Randy Wilson. Enterprise and the Debtors have been litigating the State Court Case since September 9, 2016—well before commencement of these Bankruptcy Cases—and the State Court Case was nearly trial ready as of the Debtors’ January 15, 2018 petition date (the ‘Petition Date’). Enterprise seeks abstention so that the State Court Case, which has been stayed since the Petition Date, can be advanced to judgment in the State Court. In the event Enterprise obtains a judgment against one or more of the Debtors in the State Court Case, Enterprise will not take any action to enforce such judgment without further order of the Bankruptcy Court.

During 2009 and 2011, as an inducement for Enterprise to invest $1.5 billion into building the Acadian pipeline, Enterprise and EXCO entered into a series of interrelated agreements for (i) the firm transportation of dedicated volumes of EXCO’s natural gas (the ‘FT Agreements’) on the Acadian pipeline between 2011-2021, and (ii) EPO’s purchase of EXCO’s natural gas at a discount off index prices (the ‘EXCO Sales Contract’ and, together with the FT Agreements, the ‘Agreements’) between 2011 and 2021. The term of these Agreements was later extended by four years to run through October 31, 2025. In August 2016, EXCO formed Raider through a Texas ‘divisional merger,’ and purported to split EXCO into two companies and transfer all of EXCO’s gathering, marketing, and transportation (‘GMT’) agreements (including the Agreements with Enterprise) to Raider, while EXCO’s assets remained with EXCO. EXCO took these actions in an attempt to shed itself of costly GMT obligations. Following the 2014 downturn in the oil and gas industry, EXCO’s GMT agreements were a substantial drain on EXCO’s liquidity, costing the company approximately $100 million annually.”