OHA Investment Corp. v. Schlumberger Technology Corp.

Case Type:
Case Status:
No. 17-20224 (5th Circuit, Apr 17,2018) Published
Safe-harbor provision of Louisiana Oil Well Lien Act (LOWLA) allowed sale of lessee's overriding royalty interest (ORRI) free and clear of service providers' liens. LOWLA both created liens in lessee's operating interest and extinguished liens in the hyrdocarbons produced. Under LOWLA, lienors were required to provide pre-purchase notice of liens to asset purchaser for liens to remain attached to ORRI.
Procedural context:
US District Court (SD Tex) dismissed complaints; plaintiffs appealed to 5th Circuit.
Various vendors, contractors, and subcontractors provided materials and services in connection with an offshore mineral lease. By way of the Louisiana Oil Well Lien Act, the service providers then secured liens on the lessee's operating interest. Lessee then transferred its "term overriding royalty interests" to a third party buyer (OHA) for $65 million. The overriding royalty interests entitled OHA to a percentage of all hydocarbons produced, saved, and sold from or attributable to the mineral lease, and to all proceeds thereof. Lessee then filed bankruptcy. OHA filed declaratory judgment action seeking declaration that it owned the overriding royalties and the royalty conveyance was not an executory contract subject to reject. The service providers intervened, seeking to enforce their statutory liens on overriding royalty interests.
Reavley, Smith, Owen

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