Orbit Petroleum Seeks to Pursue Chapter 11 Reorganization
Orbit Petroleum has filed a petition for protection under Chapter 11 of the United States Bankruptcy Code in Federal Court in New Mexico. The company has taken this step because it has encountered significant problems following its purchase of Tipton Enterprises, Inc. also known as Tipton Oil and Gas, (TOGA) and its subsidiaries, Gilbert's Lease Service, Toga Well Services and Blackrock Transportation, due to the number of unknown legal claims, disputes and litigation by Tipton, et.al. creditors to which Orbit has been joined as a party defendant. Although Orbit is still investigating the claims made against the company and its recently acquired subsidiaries, a stay for protection was necessary to protect the company's assets and shareholders.
Orbit anticipates it will be able to pay all valid claims and accounts in full, plus any penalties or interest owed by the company and its Tipton subsidiaries. The company has sufficient on-going revenue from its oil and gas sales and services to sustain its operations and anticipates that it will be able to emerge from bankruptcy as a viable enterprise. The key objective in filing for protection in the U.S. Bankruptcy Courts is to stay all legal actions and allow the company time to fully reconcile the validity and accuracy of the claims and liabilities of all parties including vendors and certain royalty owners against the company and it subsidiaries. Orbit intends to move quickly to put forth a plan which can be acceptable to all parties.
Orbit had been working diligently since closing the purchase to secure investment capital for the development of the TOGA properties as well as the company's other assets. However, most of the funding partners have expressed reservations and even delayed possible commitments on potential funding until such time certain liabilities and legal matters, if valid, are resolved. The company anticipates that any interested funding partners will be more willing to invest with Orbit after the approval of a creditor plan. Orbit will be working to secure a funding partner's commitment as a part of the funding of any creditor plan.
Orbit Petroleum closed the Tipton Acquisition on October 4, 2007. Orbit acquired Tipton Enterprises which includes properties in Chaves, Lea, Eddy and Roosevelt Counties, New Mexico for $8,825,000. Orbit paid $2,625,000 with $825,000 in stock and $1,800,000 in cash. Much of the $1,800,000 was paid with loans provided to Orbit by insiders and associates. The balance of $6,200,000 includes the assumption of roughly $3,000,000 in debt and $3,200,000 which is to be paid in cash to the Sellers over time. Orbit plans to adjust (reduce) the $3,200,000 to be paid to the Sellers of TOGA by certain liabilities for unpaid royalty and operating expenses and costs that were not disclosed and were unknown to Orbit at closing. The overall liability to Orbit for total debt incurred in the acquisition is still being reconciled.
The TOGA properties include approximately 24,320 acres in 10 unitized fields with three fields comprising more than 16,000 acres. Current production is approximately 130 BOPD from 109 active wells.