How Can I Use Engineering Data to Make Better Collection Recoveries?
Problem: My customer failed to pay for the work done on his oil & gas property, so we were forced to sue and just received a judgment in our favor. But they don’t seem to have any economic assets. What can I do now to get paid?
Solution: You might want to review some production histories that are found in the available engineering databases.
Story: A few years ago, we were successful in obtaining a summary judgment against a small oil & gas company in a suit to persuade them to pay their outstanding unpaid invoices. The company had no known operated oil & gas properties in Texas that were economic. The key word was “operated.” There was a suspicion of some interests in wells operated by other companies, but there is no viable method today to obtain this information except through depositions and document discovery, or painstaking county-by-county research, and we were concerned about the cost. We needed some “out of the box” thinking.
Way back in my previous life as a petroleum engineer, I was aware of some databases that were available for tracking historical production. I previously used this information to plot production over time on semi-logarithmic paper for calculations of estimated ultimate recoveries, and for determination of future values.
I was also aware that this data included all wells in all states. Most importantly, I wanted to know whether I could turn this Texas judgment into something that might be used to attach to some other revenue source in another state.
Analysis: Our research effort, although a little unorthodox, resulted in finding one puny little oil well in Kansas. The property did not even have enough production to generate sales on a monthly basis. However, we found that the production was flat, and there was a load of oil picked up for sales every third month on a very consistent basis. During our post-judgment research, we had already discovered the existence of the company’s bank account. So instead of going through the effort of domestication of the Texas judgment in Kansas, we decided to time an effort to garnish the bank account. We knew that oil revenues were paid on about the 25th of the month. Our attempt was to have a garnishment served on the bank shortly after that date.
Conclusion: We were lucky. Our research effort successfully attached almost $15,000 in the debtor’s bank account which was close to a full recovery including attorney’s fees. The bottom line is that you need to be prepared to use every tool available today.
Dore Rothberg McKay takes pride in being part of the risk profile decisions and business activities of a large section of the oil & gas services industry. We hope to continue to earn your respect and your trust.