Chaparral Energy aims to sell pipeline in push to exit bankruptcy

By

Jim Christie

SAN

FRANCISCO

, Feb 21 (Reuters) -

Chaparral Energy Inc

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

)