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Petroleum

Remington Oil and Gas Corporation Seeks Rehearing Over $29.9 Million Awarded to Phillips Petroleum

Strategic Insights

— 2 min read

Remington Oil and Gas Corporation, a leading independent oil and gas exploration and production company, has announced its intention to file a motion for rehearing in a Louisiana court of appeals case involving a $29.9 million award to Phillips Petroleum Company. The case, which began in 1990 and went to trial in 1997, revolves around a 1977 agreement between Remington and Phillips, in which Phillips assigned its interest in the South Pass 89 offshore lease to Remington, subject to a 33% net profits interest. Remington has invested over $200 million in developing the field and has paid Phillips over $100 million, relying on the express terms of the farmout document.

Key Takeaways:

  • The Louisiana court of appeals ruled in favor of Phillips Petroleum Company, awarding $29.9 million plus court interest, effectively reversing several findings of the trial court.
  • Remington Oil and Gas Corporation seeks a rehearing on the opinion, arguing that it is erroneous and inequitable.
  • The company's management believes that the appeals court's ruling undermines the basis for Remington's development of the South Pass 89 field.
  • Specifically, Remington disputes the appeals court's finding that the farmout agreement is not production-dependent and that any proceeds from Remington's claims should be credited to the net profits interest.
  • The court's decision potentially jeopardizes Remington's financial position, as the appeal process is expected to take a minimum of three months and a maximum of a year or more to conclude.
  • Remington has a long history of investment and development in the South Pass 89 field, with over $200 million invested and $100 million paid to Phillips.
  • The dispute revolves around the 1977 farmout agreement, which granted Phillips a 33% net profits interest in offshore Louisiana, and a gas purchase contract with TETCO that was widely criticized as being above market prices.
  • The appeals court's opinion is particularly contentious, as it allegedly "rewrote the farmout agreement and misconstrued both the corporate structure of Remington and the independence of CKB Petroleum."

Statistics:

  • $29.9 million: the amount awarded to Phillips Petroleum Company by the Louisiana court of appeals.
  • $18 million: the amount Remington owed Phillips as of 1998, following court interest.
  • $200 million: the amount Remington has invested in developing the South Pass 89 field.
  • $100 million: the amount Remington has paid to Phillips.
  • $2.75 barrel: the original tariff charged by Marathon for pipeline transportation, later used in the dispute over transportation costs.
  • $69.6 million: the settlement payment made by TETCO to Remington in 1989.
  • $41.2 million: the amount the trial court ruled should have been allocated to the net profits account.
  • $9.3 million: the amount awarded by the trial court to Phillips on the TETCO issue.
  • $21.0 million: the amount awarded to Phillips by the appeals court on the TETCO issue.

Sources:

  • Remington Oil and Gas Corporation, "Remington Oil and Gas Corporation Files Motion for Rehearing Over $29.9 Million Awarded to Phillips Petroleum Company" (January 25, 2000).
  • "Remington Oil and Gas Corporation Files Motion for Rehearing Over $29.9 Million Awarded to Phillips Petroleum Company" (January 25, 2000 PR Newswire).
  • Remington Oil and Gas Corporation, Corporate Governance (2000).

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