Nabors Offshore Corp. v. Whistler Energy II LLC is the rare bankruptcy case where the outcome was consistent with the realities of operating in the oil patch rather than the artificial constraints of the Bankruptcy Code. The Fifth Circuit balanced the debtor’s interest in minimizing the costs of administering its estate with a counterparty’s economic interest in its property sitting idle in the debtor’s possession. The counterparty was not made to eat the costs for the time its equipment sat unused after rejection of their contract.
Whistler owned a production platform in the Gulf of Mexico and contracted with Nabors for a drilling rig and related equipment and services. After a worker was killed in an accident, federal regulators shut down the project. Whistler filed bankruptcy, abandoned the well, and rejected the contract. It took four months after rejection for regulators to approve a demobilization plan and another two months for Nabors to remove the rig from the platform. Nabors filed a $7 million administrative expense claim for costs incurred during the six months post-rejection when its equipment sat idle on the platform. Whistler objected on the basis that it neither requested nor used Nabors’ services post-rejection, and thus, Nabors provided no benefit to the estate. Continue Reading Bankruptcy Ruling Sides With Oil Field Realities