Constellation Energy Partners LLC announced Monday that Alabama's Circuit Court of Tuscaloosa County has approved a settlement with Trust Venture Co. LLC.
According to information filed with the U.S. Securities and Exchange Commission, Trust Venture sued Constellation in January 2009 over the nonoperating net profits interest (NPI) held by the Torch Energy Royalty Trust on wells -- located in the Robinson's Bend Field in Alabama -- owned by Robinson's Bend Production II LLC (RBP II), a Constellation subsidiary. Trust Venture -- which alleged breach of contract over NPI conveyance and claimed it paid above-market rates for services -- was seeking unspecified damages and a full accounting of the NPI.
"We're extremely pleased to be in a position to resolve this matter in a way that should provide greater certainty on our future cash flow and operating plans," Constellation CEO Stephen R. Brunner said in February when the companies first agreed to settle.
Under the terms of the settlement, expected to take effect on June 13, RBP II will pay Trust Venture $1.2 million for legal fees and make an irrevocable offer of at least $1 million to purchase the NPI from the trust at public auction. Both parties will also agree that the cumulative deficit balance in the NPI account totaled about $5.8 million last September, and that no further payments will be due to the trust until the cumulative deficit balance is zero.
Trust Venture will also agree that all prior fees were in compliance with its NPI conveyance agreement, and once the settlement is in effect the fee for water gathering and disposal will be reduced from $1.00/bbl to 53 cents/bbl. According to the agreement, Trust Venture will also specifically agree that the fees "do not exceed competitive contract charges prevailing in the area for any such operations and services."
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