In Re Energy Partners, Ltd.

Facts

On May 1, 2009, Energy Partners, (P) filed Chapter 11. Eleven days later, P filed an Expedited Application for Order Pursuant to §§ 327(a) and 328(a) Authorizing Employment and Retention of Parkman Whaling LLC as Financial Advisors for P. The amount of monthly compensation that the Court approved is $75,000.00, plus expenses. The professional services that Parkman Whaling LLC (Parkman Whaling) has provided include, among other things, developing an enterprise valuation of P. The Office of the United States Trustee appointed an Official Committee of Unsecured Noteholders (the Unsecured Noteholders' Committee), and an Official Committee of Equity Security Holders (the Equity Holders' Committee). On May 15, 2009, P filed its initial Disclosure Statement. Birch Run Capital, LLC (Birch Run) objected. Birch Run objects to Parkman Whaling's valuation and has argued that since Parkman Whaling's March 31, 2009 valuation, the spot price of oil has increased and forward price curves for both oil and natural gas have increased significantly; therefore, according to Birch Run, Parkman Whaling's valuation is too low and outdated. On June 11, 2009, P filed its Second Amended Joint Plan of Reorganization. This Court has approved the Second Amended Disclosure Statement and has set the confirmation hearing for July 29, 2009. It references two valuation reports: (1) the Parkman Whaling report; and (2) the Birch Run report. Parkman Whaling's enterprise valuation of the Debtor ranges 'from $576 million to $671 million, with a midpoint of $624 million.' Parkman Whaling concluded that no residual value is available for the eligible equity interests. Parkman Whaling has listed in its appraisal of the Debtor a 'realizable value for the New EPL [ the Reorganized Debtor] Common Stock of $499 million.' Birch Run claims 'the current EPL Common Shares are estimated to be worth in excess of $212 million' whereas 'Parkman Whaling estimates the current value of these interests at zero ($0).' The closing share price for EPL Common Stock Interests on June 8, 2009, was $ 0.12 per share, for a total market capitalization of approximately $3.85 million or an amount approximately $208 million less than the equity value asserted by Birch Run.' On July 13, 2009, the Equity Holders' Committee filed the Tudor Pickering Application. Tudor Pickering wants: (a) a nonrefundable advisory fee of $500,000.00; (b) a nonrefundable expert witness fee of $ 25,000.00 per day, payable each day that a Tudor Pickering Holt & Co. Securities, Inc. (Tudor Pickering) employee is requested, and made available, for the purpose of deposition or testimony; (c) a nonrefundable extended assignment fee of $100,000.00 per month, payable beginning September 1, 2009, and each month thereafter; and (d) any out-of-pocket expenses. Tudor will analyze P's assets and liabilities, the valuation of P's businesses and objecting to the plan of reorganization; (b) attending meetings and negotiating with representatives of the Debtor and creditors; (c) assisting in the review, analysis, and negotiation of the plan of reorganization; (d) appearing before this Court and other courts and protecting the Equity Holders' Committee's interests; and (e) performing all other necessary valuation services in this case. On July 14, 2009, the Unsecured Noteholders' Committee filed the Houlihan Lokey Application which includes: (a) a nonrefundable initial fee of $ 500,000.00; (b) a nonrefundable additional fee of $ 100,000.00 for August 1, 2009, through August 15, 2009; (c) a nonrefundable additional fee of $ 100,000.00 for August 16, 2009, through August 31, 2009; and (d) any out-of-pocket business expenses. Houlihan will render to the Unsecured Noteholders' Committee include but are not limited to, the following: (a) evaluating the Debtor's debt capacity and enterprise valuation; (b) analyzing the Debtor's business plans and forecasts; (c) evaluating the Debtor's assets and liabilities; (d) analyzing and reviewing the Debtor's financial and operating statements; (e) assessing the financial issues and options concerning the Debtor's Chapter 11 plan of reorganization or liquidation; (f) providing financial analyses; (g) negotiating with the Debtor and third parties; and (h) providing testimony in court and in depositions. On July 14, 2009, Bank of America, N.A., as agent for itself and on behalf of the Prepetition Secured Lenders, (the Agent) filed its objections to the Applications in that (1) the proposed fees are too high; (2) the proposed fees are nonrefundable; (3) the proposed fees are to be paid from P's cash collateral on which the Agent has a lien; and (4) the amount of cash collateral that would have to be used to pay the fees would violate the limitations set forth in the Budget for paying consultants. The court held a hearing to address the issues. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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