SAN FRANCISCO (Reuters) - Chaparral Energy Inc [CHARN.UL] aims to have its bankruptcy exit plan confirmed next month, which may require suing a co-owner of a carbon dioxide pipeline to advance the sale of the asset, the bankrupt oil and gas producer said in court papers on Friday.
Chaparral has a hearing on March 9 to confirm its plan to emerge from Chapter 11 bankruptcy, funded in part by asset sales. The company filed for bankruptcy in May after talks with stakeholders failed to produce a restructuring support agreement to tackle its financial troubles.
Chaparral said it no longer needed the pipeline in Oklahoma running from a Koch Fertilizer LLC fertilizer plant. It transports carbon dioxide used in "flooding" fields to help extract oil and gas from depleted wells.
Chaparral and Merit Energy Co together own more than 90 percent of the pipeline. Under an agreement, Merit bought CO2 from the Koch plant and set aside a portion for Chaparral's use.
Their deal expired in December and talks to renew it failed, Chaparral said, adding that talks to acquire CO2 directly from Koch had also failed.
The company said it had determined, along with its major stakeholders, that even if it were to get access to the CO2, it would only be able to extract "relatively modest" amounts of oil and gas in the two fields, making the pipeline sale the best option.
Chaparral noted that the pipeline could be converted to transport oil, making its location in central Oklahoma a valuable asset. A number of companies have expressed interest, but they want full ownership of the pipeline, Chaparral said.
If the pipeline's co-owners do not consent to a sale, Chaparall will press an adversary proceeding within its Chapter 11 case to force a sale, the Oklahoma City, Oklahoma-headquartered company said.
The case is In re Chaparral Energy Inc et al, in U.S. Bankruptcy Court for the District of Delaware, No. 16-11144.
For Chaparral: Joseph Barsalona II, Mark Collins, John Knight and Brendan Schlauch of Richards Layton & Finger, and Richard Levy, Keith Simon and David McElhoe of Latham & Watkins
Reporting by Jim Christie; Editing by Richard Chang