E2B: Avoiding Tax Consequences During Oil & Gas Restructurings

 

With commodity pricing depressed and the coronavirus pandemic continuing to affect industry, many previously passive upstream creditor investors in oil and gas companies are finding their status suddenly changing.

Many oil and gas companies and their investors are looking at declaring bankruptcy, which creditors may think they’re ready for. But, they must take income tax considerations into account, says Lynn Loden, Managing Director at Opportune LLP.

“A lot of people will go, ‘Well, there’s just not going to be a tax problem with this. We’ll figure it out,’ because that’s not driving the bus, which is true. Tax shouldn’t drive the bus in bankruptcy,” Loden says. “But it can be a nasty little problem with the way that the bankruptcy code looks at tax during bankruptcy. Those costs can be bumped up to a priority ahead of some senior creditors if you trip a tax during the administration of the bankruptcy case. That’s where, to me, a lot of the risk is.”

For creditors, the form of the instrument they receive could bring along with it unexpected tax consequences, both immediate and long term.

These impacts arise from a lack of knowledge about specific regional regulations and tax-related information, such as oil and gas in places deemed real estate in the U.S., which sets up foreign investors as landowners stateside, which can have sweeping tax consequences.

Loden said the biggest key is simply reaching out for help from a professional with experience in managing these types of oil and gas restructuring situations, such as the leadership at Opportune.

“If you’re a creditor that’s about to become a non-operating owner and the restructuring council is going to give you a partnership interest: Raise your hand quickly,” Loden says. “Because if you’ve never had one before, they’re different. There’s a lot of information and some of it complicates your compliance process and it could even bring your tax-exempt status into question.”

Follow us on social media for the latest updates in B2B!

Twitter – @MarketScale
Facebook – facebook.com/marketscale
LinkedIn – linkedin.com/company/marketscale

Follow us on social media for the latest updates in B2B!

Image

Latest

AI in content marketing
Generative AI in Content Marketing: Why Creativity & Authenticity Will Make it Work
July 11, 2024

Will 2024 be known as the year AI made waves in content marketing? It sure seems so, with recent AI-driven ads from Toys R Us and Under Armour generating significant buzz online. Not just this: Despite having no official ties to the brand, a mock Volvo ad created entirely by AI has also gone…

Read More
Hiring Made Human: Hiring When You’re a Start-Up
July 11, 2024

The challenges of hiring for a startup have become more pronounced these days than ever. With technological advancements and evolving market demands, startups must be agile and strategic in their hiring practices to ensure success. According to some studies, nearly 90 percent of startups fail, with a significant factor being the inability to attract…

Read More
Focus on the Customer
Fifth Inning – Focus on the Customer
July 11, 2024

In a compelling narrative by Jesse Cole, the Savannah Bananas, a baseball team known for its unconventional approach, has declared advertising dead. Cole emphatically asserts that while advertising may attract customers, it is the fan experience that fosters lasting loyalty. In a bold move, the Savannah Bananas have eliminated all forms of advertising at…

Read More
Dr. Mark Manera talks Trucking Industry
The Trucking Industry Needs a Fitness Overhaul to Jumpstart a Trucking Health Revolution
July 11, 2024

With the trucking industry seeing many changes that prioritize efficiency and productivity, the health of truck drivers has increasingly peaked as a critical concern. With life expectancies for truck drivers averaging 16 years less than the general population, there is an urgent need to address health issues within the industry. Recent initiatives, like the…

Read More