Dore Law - January 2020

THE D or É R eport

D ore L aw G roup . net

JANUARY 2020

ARE YOU A CRITICAL VENDOR?

With industry bankruptcies being a weekly news story, every business has begun to pay more attention to the credit it extends to customers. In the oil and gas sector, it is almost impossible to avoid becoming a creditor in the bankruptcy of one of your customers these days. At Doré Rothberg McKay, some of the ways we help our clients deal with bankruptcies are by filing liens to maximize recovery and negotiating or working with the debtor or trustee, including defending any preference claims brought against your company. In the past few years, trade creditors have found another way to get paid when their customer files for bankruptcy — being named a critical vendor . In a Chapter 11 bankruptcy, creditors who are designated “critical” generally get full payment for labor and materials supplied both before and during the bankruptcy. So, how do you become a critical vendor? First, critical vendors are those that are vital to the bankrupt company’s continued operations. A critical vendor provides goods or services that cannot be easily replaced, or has a special skill set, certification, or proprietary product that would significantly impact operations if discontinued. Second, it is the bankrupt company that must name its critical vendors. The courts have shown more and more willingness to allow critical vendors in business bankruptcies. If named critical, that company’s pre-petition claims get paid in full. In exchange for such

payment, the vendor agrees to continue working with the debtor on favorable preexisting trade terms. While you cannot ask the bankruptcy court or force the debtor to make your company a critical vendor, you can discuss the effect of losing your product or service with your customer before or during a bankruptcy. While your company is ordinarily under no legal obligation to continue doing business with a customer who files for bankruptcy (unless you have a contract that has not been terminated), it is important not to frame your effort to become a critical vendor as an ultimatum or otherwise risk violating the automatic stay. Other advantages to being named a critical vendor in a bankruptcy include the recognition of your company’s importance

to the customer and leverage in future negotiations. As a critical vendor, you are under less pressure to renegotiate trade terms or reduce prices as the bankrupt debtor tries to cut costs. However, as a part of representing our clients who find themselves trade creditors who are not deemed critical in a bankruptcy, Doré Rothberg McKay often argues to limit the number of critical vendors. Fewer critical vendors results in a larger remaining pool of funds allowable to the other creditor groups and potentially a greater recovery. Because navigating through critical vendor issues requires a delicate balance of efforts, we look forward to guiding you through the process. -Zachary McKay

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THROW AWAY YOUR RESOLUTIONS

At the start of each new year, about half of all Americans set at least one New Year’s resolution, a promise to themselves that they will thrive in the coming year. Unfortunately, research from YouGov Omnibus, an international market research firm, found that only 1 in 5 Americans stuck to their resolutions. The fallibility of New Year’s resolutions is why few successful CEOs or leaders bother making them. Around this time of year, plenty of articles pop up with hot takes like, “Don’t set New Year’s resolutions; make goals instead!” Unfortunately, if you haven’t been making goals already, you’ve likely been setting yourself up for failure. Setting goals, achieving them, and making new ones should be a habit all year long, not just something you do on Jan. 1. The start of a new year is still a great time to reflect and strategize, but rather than fall on an old cliche, take a page from two of the most successful people in business.

At the start of each year, Ferriss spends an hour going through his calendar from the past 12 months and making a note of every person, activity, or commitment that sparked the strongest emotions, both positive and negative. The most positive events get rescheduled immediately for the new year. Meanwhile, the negative ones get put on a “Not-To-Do List” and hung up where Ferriss can see them.

PICK A WORD OF THE YEAR WITH MELINDA GATES.

“I do believe in starting the new year with new resolve,” says Melinda Gates, co-founder of the Bill & Melinda Gates Foundation, “but instead of adopting a resolution, I choose a word of the year — a word that encapsulates my aspirations for the 12 months ahead.” Gates says that words like “spacious” or “grace” have helped her center herself and serve as a reminder about what she really wants to focus on. In 2019, Gates chose the word “shine,” stating that, “It’s a reminder for all of us to turn on the lights inside of us, lift each other up, and shine together.”

REFLECT ON 2019 WITH TIM FERRISS.

For decades, entrepreneur and best-selling author Tim Ferriss made New Year’s resolutions every year. Then, he developed a better strategy. “I have found ‘past year reviews’ (PYR) more informed, valuable, and actionable than half-blindly looking forward with broad resolutions,” Ferriss said in a 2018 blog post.

OIL & GAS BANKRUPTCY TRACKER 2019

(limited to Debtor Liabilities > $10MM)

FILING DATE

DEBTOR NAME

COURT

CHAPTER

REPORTED LIABILITIES

8/27/2019

Epic

Texas-Southern

11

$100 million to $500 million

9/2/2019

PetroShare

Colorado

11

$50 million to $100 million

9/11/2019

Columbus Oil & Gas

Michigan-Eastern

11

$50 million to $100 million

9/11/2019

Alta Mesa Holdings

Texas-Southern

11

$1 billion to $10 billion

9/15/2019

Sheridan Holding

Texas-Southern

11

$1 billion to $10 billion

10/3/2019

EP Energy

Texas-Southern

11

$1 billion to $10 billion

10/18/2019

Longhorn Service

Oklahoma-Western

11

$10 million to $50 million

10/22/2019

MTE Holdings/Partners

Delaware

11

$10 million to $50 million

10/23/2019

Olam Energy

Delaware

11

$10 million to $50 million

10/29/2019

American Nat. Gas/Mine/Murray Equip.

Ohio-Southern

11

$1 billion to $10 billion

10/29/2019

C-Mar America

Texas-Southern

7

$10 million to $50 million

10/31/2019

Moriah Power River

Wyoming

11

$100 million to $500 million

11/7/2019

Cowboy Pumping

Oklahoma-Western

11

$10 million to $50 million

11/8/2019

Arsenal/ River Ridge

Delaware

11

$500 million to $1 billion

11/8/2019

MDC

Delaware

11

$100 million to $500 million

11/18/2019

Approach Resources

Texas-Southern

11

$100 million to $500 million

11/20/2019

Eagle Energy

Texas-Northern

15

Unknown

A full list of 2019 oil & gas bankruptcies, including expanded information, is available upon request to the Doré Law Group P.C. The full list has 265 business entities as of Nov. 1, 2019.

WELCOME BACK!

Lauren Morgan, an associate directing lien filings and collections, is back in the office full-time after months of medical leave. We know many clients, as well as everyone at Doré Rothberg McKay, are pleased to welcome back Lauren, and grateful for her recovery.

The holidays saw many of our staff and clients traveling for family and fun. Andre Stanojcic, who supervises our MSA reviews, returned to Serbia with his wife and baby to visit extended family in “the old country.” And Lisa Rothberg, Director of Liens and Transactions, visited Israel. We are glad for their safe travels. 2019 has been a year with lots of challenges. Our law firm wishes for you lots of opportunities in the new year.

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HOPPIN’ JOHN

Inspired by Epicurious

A traditional New Year’s favorite in the South, Hoppin’ John includes black-eyed peas that are said to represent coins, a sign of prosperity for the coming year. It’s usually served alongside collard greens, which represent cash.

INGREDIENTS •

1 cup dried black-eyed peas

1 smoked ham hock 1 medium onion, diced 1 cup long-grain white rice

• • •

5–6 cups water

• •

1 dried hot pepper, optional (arbol and Calabrian are great options)

DIRECTIONS

1. Wash and sort peas. 2. In a saucepan, cover peas with water, discarding any that float. 3. Add pepper, ham hock, and onion. Gently boil and cook uncovered, stirring occasionally, until peas are just tender, about 90 minutes. At this point, you should have about 2 cups of liquid remaining. 4. Add rice, cover, drop heat to low, and simmer for 20 minutes, undisturbed. 5. Remove from heat and let steam for an additional 10 minutes, still covered. 6. Remove lid, fluff with a fork, and serve.

AQUARIUS CAPRICORN CELEBRATE CHAMPAGNE FIREWORKS

FREEZING JANUARY MIDNIGHT NEW YEAR PARTY

PIG RESOLUTION

SNOW TOAST WINTER

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Are You a Critical Vendor?

Are New Year’s Resolutions a Waste of Time?

Oil & Gas Bankruptcy Tracker 2019

3 4

Welcome Back!

Hoppin’ John

Optimize Your Business With Eric Ries

JUMP-START YOUR BUSINESS WITH ERIC RIES’ ‘THE LEAN STARTUP’

Throughout his book, Ries emphasizes the importance of consumer feedback for the success of your business, but he also warns against putting any real value in vanity metrics, which TechCrunch describes as data points, “like registered users, downloads, and raw page views.” Anyone can generate immediate hype for a product, but it’s another thing to maintain constant engagement and experience growth of consumer interest. With a good MVP and continued improvement of your service or product, your business will see that growth and also retain customers. Ries’ guidance does not end with MVPs and vanity metrics; here are some other key takeaways that will keep you on the lean startup path when it’s most daunting.

After reading just a few pages, it’s easy to see why everyone raves about Eric Ries’ invaluable manual “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.” Ries is a fantastic writer, but two aspects of his writing style separate him from the pack of typical business writers and keep you turning pages: He is intellectually honest and cheerful about his business insights.

“It’s the boring stuff that matters most.”

Eric takes a common notion in business — “fail fast, succeed fast” — and breaks it down into a system that works for businesses and keeps consumers happy. “The Lean Startup” recommends the use of a minimum viable product, or MVP, to gauge demand before you embark on major product development. Forbes describes an MVP as “a product with only a basic set of features, enough to capture the attention of early adopters and make your solution unique.” If you jump into building the best product possible before measuring what your consumers actually need, you risk wasting a lot of time. Market research can tell you a lot, but MVPs can tell you even more. Plus, if your initial rollout is successful, you can respond quickly to consumer feedback and tailor your final product to specific needs.

“Remember if we’re building something that nobody wants, it doesn’t much matter if we’re doing it on time and on budget.”

“Customers don’t care how much time something takes to build. They care only if it serves their needs.”

In the epilogue, Eric’s intellectual honesty shines; he readily admits that some readers may take his theories as a means to justify their past business actions. But he encourages everyone to use his book instead as a guide for what they will do next in their entrepreneurial journey.

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