THE D or É R eport
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ANOTHER YEAR OF BANKRUPTCY
A lot of not-so-great things happened in 2019. The Houston Astros fell in Game 7 of the World Series, there was a college admissions scandal, the Notre Dame Cathedral caught fire … oh, and over 300 oil and gas-related companies filed bankruptcy. At the beginning of 2019, one of the things our firm endeavored to do was keep an active list of oil and gas bankruptcy cases filed in the U.S. throughout the year. Every day, we checked the filings for new cases and added what we found to the Bankruptcy Tracker 2019. You may have noticed that we added a Bankruptcy Tracker section each month to our Doré Report newsletter (the full tracker database is available upon request). The results were staggering. January started out very slow with only one small Chapter 7 filing in California. February had 13. March had 55. The 309th entity filed on Dec. 16. What caused this second wave of oil and gas bankruptcies in five years? This past year, we saw what most in the industry would call another downturn, largely spurred by the continuously depressed commodity prices. We spent most of the year avoiding the D-word, but it remained an unspoken truth. Oil prices spent most of the year in the $50 range, which didn’t help the cause. Another factor is that the industry tried to pick up where it left off after the 2014 downturn. But this time, a lot of traditional bank lenders were generally nervous to get
back into the oil and gas business. Several major lenders had begun withdrawing from the space completely. Instead, we saw a lot of private equity groups throw their names (and their money) into the hat. These new lenders introduced fresh attitudes to an industry traditionally known for drastic overspending. A focus seemed to be placed on cash flow, which many exploration and production/other oilfield service companies seemed to struggle with. Before you knew it, the monies started drying up along with new drilling permits. As we have written about before in the Doré Report newsletter, we saw a rise in “Chapter 22” bankruptcies (a company’s second chapter 11). This was probably the result of overly optimistic trend lines and projections of where the industry would be post-2014. This time around, we aren’t seeing those overly optimistic speculations from the bankers, financial advisors, attorneys, or other industry professionals. Everyone settled down into a wait-and-see attitude, which is where we remain today. So, the question is “What can we expect to see in 2020?” Probably more of the same for a little while. But if these past five years have shown us anything, it is that the industry is resilient.
After all, it wasn’t all bad in 2019. The U.S. Women’s National Soccer team won another World Cup. Jose Altuve hit a walk-off home run against the Yankees in the ALCS. We have seen a meaningful rise in bankruptcies filed in Houston courts, meaning fewer oil and gas debtors are filing bankruptcies in Delaware away from their creditors. We have seen a rise in the trend of debtors taking care of their service companies through “critical vendor,” “operating expenses,” and “lienable operating expenses” motions. Overall, the number of 2-cents-on-the-dollar unsecured recoveries is way down. Why is that? We prepare. Our job is to keep you in a position to protect your claims and navigate through the complex bankruptcy process. We file perfect liens, and we act quickly. Remember, the companies that learn to operate profitably during the tough times will be best positioned to thrive in the years to come. Doré Rothberg McKay is pledged to help you get there.
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OUR FIRM: A LOOK BACK AT 2019
Doré Rothberg McKay had a rather incredible 2019. And there’s no better time than now to share some our results:
• Zach McKay had a great outcome in September in a Louisiana oil and gas bankruptcy case. The debtor claimed our service company client owed $1.6 million. The original agreement was to use equipment on an as-needed basis to reduce the debtor’s old bills. The debtor claimed the equipment was to be billed every day it was in the yard and waiting to go to work. After a trial, the court ruled we owed $38,000, our original offer. Special thanks to the client who believed in us. • A recent bankruptcy has allowed us to see just how many mineral liens Lisa Rothberg’s transactions section can file. In the second half of 2019, we researched, prepared, and filed over 250 liens in just the MDC Energy bankruptcy. And, there’s still a few more on the way. • In February, our litigation section appealed a court decision concerning mineral liens to the Fourteenth Court of Appeals in Harris County. The issue was whether a prelien notice letter could serve to trap funds held by a nonoperating working interest owner. Finally, in November, the decision was a waiver of lien claim in the operator’s MSA would also prevent a lien against the nonop interest. So, we lost this one … this time; however, we are always trying new legal theories to protect our clients. • Overall, our mineral lien filings jumped from 10 per month in January to 80 per month by September. I’m proud of our team and our system approach, but we’re too good not to get better. So, we’ve begun another redesign of the system to focus on economics and timeliness.
• We created a snapshot report to give every client a brief update on every project once a month. The comments back have been encouraging, and we’ll keep fine tuning the process. • The Firm sponsored the first annual Trends & Traps Energy Symposium with over 100 professionals learning about current legal and collection issues in the oilfield services and equipment industry. Save the date for a bigger and better symposium on April 22, 2020. • We just signed a lease to expand our office space in 2020 by almost 50% and just completed an upgrade on all the hardware and software systems. Our staff grew to 20 persons, and we plan to add more in the New Year. Please don’t think we’re sitting and patting ourselves on the back. We need and appreciate your feedback at every step of this journey. It’s how we get better — together. Bring on 2020!
• Over 150 MSAs were reviewed to help our clients negotiate favorable terms.
• Our real estate section assisted clients with more than 50 commercial leases.
NEW EMAIL ADDRESSES
Doré Rothberg McKay has a new domain name — DoreLaw.com — to match the new firm name and website that we introduced last year. Each member of our staff also has new email addresses using the convention first initial, last name, @DoreLaw.com (e.g. – Carl Doré is CDore@DoreLaw.com). But never fear, our old email addresses will continue to work while everyone finds time to make changes.
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‘LET MY PEOPLE GO SURFING: THE EDUCATION OF A RELUCTANT BUSINESSMAN’
From the very beginning of his 2006 memoir, “Let My People Go Surfing: The Education of a Reluctant Businessman,” it’s clear that Patagonia’s founder, Yvon Chouinard, is not the typical entrepreneur. As a kid, Chouinard wanted to be a fur trapper, and rather than going into business with dreams of getting rich, he started making climbing gear to fund his passion for scaling cliffs and adventuring in the outdoors. “Let My People Go Surfing” follows Patagonia’s meteoric rise through its victories and rough patches — including the stalled growth that led to layoffs of 20% of the staff in the 1990s — but its main focus is on the company’s ideals. In plain, forthright, and sometimes irascible language, Chouinard lays out Patagonia’s growth goals, culture aims, and environmental stewardship efforts. The last of which is truly the core of the brand. Patagonia prioritizes minimalism, function, durability, and reparability in all of its products, from backpacks to jackets. It tracks the energy and water use of its facilities, works to eliminate pollution, focuses on recycled and recyclable materials, participates in environmental activism, funds environmental organizations worldwide, and even encourages shoppers to send in worn-out apparel for reuse and repair. In short,
over the course of 272 pages, Chouinard proves he not only talks the talk but also walks the walk — and has made millions championing his cause. He encourages other entrepreneurs to do the same, laying out Patagonia’s footsteps and philosophies for readers to follow. Many already have. “Let My People Go Surfing” was updated and rereleased in 2016, but either version will make entrepreneurs think twice about their environmental impact and what they can do to reduce it. As one Amazon
reviewer wrote, “Whether you’re a manager or business owner looking to motivate your employees and create a sustainable business, or a fan of Patagonia, or someone curious about how to live a life you can feel good about, this book should work for you.”
VALENTINE’S DAY DOG TREATS: CRANBERRY HEARTS Inspired by Pretty Fluffy
To paraphrase an old saying, the way to a dog’s heart is through their stomach! This Valentine’s Day, treat your dog to some pet-friendly goodies they’re sure to love!
INGREDIENTS • 2 large eggs •
1 1/2 cups almond flour
1 tbsp coconut oil
• • •
1/2 cup dried cranberries 3–4 tbsp coconut flour
1. Heat oven to 325 F. 2. In a small bowl, beat eggs and set aside. In a separate bowl, combine almond flour, coconut oil, and cranberries. Pour in eggs and mix together with your hands until wet dough forms. 3. Mix in 1 tbsp of coconut flour at a time until dough easily forms into a ball. 4. Roll out dough on floured surface and cut with bite-size, heart- shaped cookie cutters. Transfer to cookie sheet lined with parchment paper. 5. Bake for 15–18 minutes or until treats are crisp. 6. Remove from oven and let treats cool completely before serving.
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Another Year of Bankruptcy
A Look Back at 2019
New Email Addresses
Yvon Chouinard’s Rise From Wannabe Fur Trapper to Billionaire Entrepreneur
Valentine’s Day Treats Your Dog Will Love!
Get More Love Back From Your Customers (When You Love Them First)
GIVE LOVE, GET LOVE TURN AMAZING CUSTOMER SERVICE INTO A MAJOR REVENUE SOURCE Boosting customer retention by any amount can have a huge impact on your revenue. A study conducted by Bain & Company and reported by the Harvard Business Review found that even a 5% increase in retention can boost revenue by 25%–95%. In short, your ability to retain the right customers can make or break your business. Businesses are constantly searching for ways to achieve customer loyalty. After all, it’s far more cost-effective to keep the same customers coming back to you than it is to constantly go after new ones. Marketing to new customers can cost up to 25 times more than simply catering to your existing customer base. Loyal customers who love your business are an incredibly powerful asset. They can do a lot of your marketing for you through social media and other word-of-mouth channels, convincing others that your business exists and has value. But how do you get to that point? How do you develop a strong bond with your customers that is hard to break and will keep them coming back time and time again?
they cut ties with businesses over poor customer service. Customer service includes your employee-customer interactions, your response to problems, your response time, and your approachability on social media. Look to businesses that have figured out how to do customer service right, like Apple, LEGO, and other beloved businesses in your community. Consider what you can incorporate into your own customer service experience or become a customer yourself and see just how far other businesses are willing to go for you.
Another way you can win loyal customers is just by being present. One way to do that is by answering phone calls, emails, and online inquiries immediately . The more time you put between the initial customer contact and your response, the worse it looks for you. When people visit your business in person, be there to offer a hello, answer questions, and engage in casual conversation. When you’re there for your customers, your customers want to be there for you.
It really starts with stellar customer service. Poor customer service is the No. 1 cause of customer loss. Upward of 71% of people say
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