Extraction Oil & Gas won a legal victory on Wednesday in its chapter 11 bankruptcy reorganization, one that may allow it out of midstream contracts with Colorado pipeline companies, the Denver Business Journal reported. The Denver-based oil producer had sought to reject its existing midstream contracts covering the transportation of crude oil, natural gas and liquids, and produced water from Extraction’s wells. The midstream companies argued that Extraction couldn’t reject the contracts. Chief Bankruptcy Judge Christopher Sontchi of the U.S. Bankruptcy Court for the District of Delaware granted summary judgment in Extraction’s favor against Platte River Midstream LLC and DJ South Gathering, both subsidiaries of Denver-based ARB Midstream, and against Grand Mesa Pipelines and Elevation Midstream. The contracts cover the transportation of more than 200 million barrels of crude oil and obligations for Extraction to pay tens of millions of dollars annually. Extraction sought to get out of the midstream agreements to give it more leverage in renegotiating terms as part of Extraction’s bankruptcy restructuring. Extraction Oil & Gas filed for chapter 11 protection June 14 to reorganize and free itself from $1.7 billion in debt it couldn’t pay, either by negotiating a debt-for-equity swap with lenders, or by merging or being acquired by another oil and gas company.
