Investing in Oil and Gas Royalties: Distressed Counterparty Risk Considerations

As oil and gas prices decline and the availability of reserved-based senior credit becomes increasingly scarce, exploration and production companies are seeking to refinance into more traditional term loans or to divest royalties in an effort to raise cash. In Investing in Oil and Gas Royalties: Distressed Counterparty Risk Considerations, SRZ partner David J. Karp and associate Parker J. Milender discuss oil and gas royalty interests and the counterparty risks they present to investors. This White Paper, which was republished by Reorg Research, covers how investors who own carved out royalty interests need to take inventory of counterparty risk and how these positions will be treated in a bankruptcy, including the potential risks of contract recharacterization or rejection and clawbacks of payments already received.