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EXHIBIT 99.2
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF TEXAS
MIDLAND DIVISION
IN RE: )
)
COSTILLA ENERGY, INC., ) CASE NO. 99-70653
Tax I.D. No. 75-2658940 ) (Chapter 11)
)
Debtor. )
ORDER APPROVING:
(1) SALE OF SUBSTANTIALLY ALL OF THE DEBTOR'S ASSETS
FREE AND CLEAR OF ALL CLAIMS, LIENS, INTERESTS AND
ENCUMBRANCES PURSUANT TO SECTIONS 105 AND 363 OF THE
BANKRUPTCY CODE, SUBJECT TO THE
TERMS OF A PURCHASE AND SALE AGREEMENT; AND
(II) ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS
PURSUANT TO SECTION 365 OF THE BANKRUPTCY CODE AND RULE 6006 OF
THE BANKRUPTCY RULES
On April 20, 2000, Costilla Energy, Inc. ("Costilla") entered into an
Asset Purchase Agreement ("APA") with Louis Dreyfus Natural Gas Corp. ("LDNG")
subject to Bankruptcy Court approval. All capitalized terms herein shall have
the same meaning as defined in the APA. All section references are to the
Bankruptcy Code. On April 26, 2000, this Court entered an Order providing for
buyer protection provisions in favor of LDNG. On April 28, 2000, Costilla filed
a Motion to approve the sale of Costilla's oil and gas properties and to assume
and assign certain contracts to LDNG or the successful bidder under an auction
procedure ("Sale Motion"). On May 4, 2000, this Court entered an Order
establishing bidding procedures ("Procedures Order"). On May 30, 2000, an
auction was held at the offices of Costilla in which LDNG and Titan Resources,
L.P. ("Titan") participated as bidders. LDNG was the successful bidder at the
auction, with a final bid of one hundred thirty-three million, two hundred fifty
thousand dollars
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($133,250,000). A hearing was held on May 31, 2000 to approve the sale to LDNG
for the base purchase price of $133,250,000 (subject to adjustments as called
for under the APA).
The Court having considered the evidence and arguments presented by
Costilla, LDNG and other objecting parties at the hearing on the Sale Motion,
and having made oral findings on the record, it is hereby
ORDERED, ADJUDGED and DECREED that:
1. This Court has jurisdiction over the Sale Motion and all related
matters pursuant to 28 U.S.C. Sections 157 and 1334. The Sale Motion and all
related matters constitute core proceedings pursuant to 28 U.S.C. 157(b).
2. Notice of the Sale Motion and all related matters and the hearing
thereon was sufficient and proper and complies with the provisions of the
Bankruptcy Code and Bankruptcy rules of Procedure and the Order establishing
notice procedures previously entered by this court.
3. Costilla is authorized, pursuant to section 363(f), to sell the
Properties to LDNG for a base purchase price of $133,250,000 (subject to the
terms of the APA) free and clear of all liens, claims, encumbrances or
interests, except for Permitted Encumbrances and except as otherwise expressly
set forth in this Order.
4. Costilla is authorized, pursuant to section 365(a) and (f), to
assume and assign to LDNG the Contracts as part of the consideration for the
base purchase price of $133,250,000 (subject to the terms of the APA).
5. The terms of the APA are approved, as modified by this Order,
specifically including the modification of the base purchase price to
$133,250,000.
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6. All objections to the Sale Motion not withdrawn or resolved by
agreement, are hereby overruled and denied.
7. LDNG's objection that Titan was not a qualified bidder under the
terms of the Procedures Order is overruled and denied.
8. Titan was a qualified bidder under the terms of the Procedures
Order.
9. The May 30, 2000 auction was properly conducted under the Procedures
Order and LDNG was properly deemed the successful bidder of that auction at a
base purchase price of $133,250,000.
10. Except as otherwise provided herein, and except for the Permitted
Encumbrances, at closing, all of Costilla's right, title and interest in and to
the Properties shall immediately vest in LDNG free and clear of all liens,
claims, interests and encumbrances of any type whatsoever, including any
preferential rights and consent rights of third parties, pursuant to sections
363(f) and 365(f) of the Bankruptcy Code.
11. Except as otherwise provided herein, and except for the Permitted
Encumbrances, any and all liens, claims, interests and encumbrances of any type
whatsoever in the Properties shall attach to the proceeds of the sale in the
order of their priority to the same extent and with the same validity, force and
effect as if the assets had not been sold.
12. Costilla pursuant to sections 365(a) and 365(f) may assume and
assign the Contracts to LDNG notwithstanding any provision of the type described
in section 365(b)(2) and notwithstanding any provision in such Contracts that
prohibits, restricts, conditions, terminates or modifies the contract due to an
assignment or transfer.
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13. Other than the Permitted Encumbrances, and other than as otherwise
expressly set forth in this Order, upon LDNG's request, any and all holders of
any liens, claims, encumbrances or interests that are filed of public record
concerning the Properties, shall execute a release of such recorded liens,
claims, encumbrances or interests.
14. The base purchase price of $133,250,000 is fair consideration, and
constitutes fair market value for the Properties.
15. The sale of the Properties and assumption and assignment of the
Contracts to LDNG for the base purchase price of $133,250,000 is in the best
interests of the estate.
16. Costilla and LDNG are respectively selling and purchasing the
Properties in good faith, and both are entitled to the protection of section
363(m).
17. The sale of the Properties to LDNG shall not be free and clear of
any statutory liens for ad valorem taxes for the year 2000 in favor of those
taxing authorities that have previously filed objections to the Sale Motion.
18. Notwithstanding any other provision of this Order, LDNG will remain
subject to all Texas statutes and regulations applicable to the Properties sold
pursuant to this Order to the extent LDNG would be so subject, had the
Properties been conveyed outside bankruptcy.
19. To the extent Dawson Geophysical Company has any liens on the
Properties, such liens, if any, shall attach to the proceeds of sale and shall
have the same priority, validity, force and effect as if the Properties had not
been sold. Costilla and the Creditors' Committee have stipulated that the Harpo
Prospect leases in Eddy and Chaves Counties, New Mexico have a value of at least
the sum of $750,000.
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20. Notwithstanding any other provisions of this Order, the sale of the
Properties to LDNG, shall not, by virtue of this Order, be free and clear of the
unrecorded two percent (2%) overriding interest asserted by Thomas L. Jones, Jr.
in certain oil and gas properties in Brooks County, Texas. Costilla disputes
such interest. This Court shall later determine whether such 2% overriding
interest exists, and will enter further Orders concerning such interest. If this
Court determines that Jones has such a 2% overriding interest, LDNG may elect to
assert such an interest as a Title Defect under the APA, within five (5)
business days of the entry of this Court's Order.
21. Costilla may assume and assign, pursuant to section 365(a) and (f),
all of Costilla's rights in and to the Prize Agreement to LDNG without
restriction, penalty or diminution in Costilla's rights, such that LDNG stands
in the place of Costilla under the Prize Agreement as if no assignment thereof
had been made. Notwithstanding the foregoing, the parties reserve all rights
with respect to all other issues between the parties, including, without
limitation, the substances of any contractual dispute between the parties as to
the meaning of the Prize Agreement.
22. The farmout agreements and/or oil and gas leases that are the
subject of Michael Shelby's objection to the Sale Motion are not being sold or
assigned to LDNG, therefore such objection is moot.
23. The entry of this Order shall not affect or alter the preferential
rights to purchase held by Longview Production Company ("Longview") in
properties or interests of Costilla and any and all such rights are preserved in
all respects and the sale approved herein is subject to Longview's preferential
rights to purchase and the Costilla is authorized and directed to sell the
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properties in Arkansas subject to the preferential rights of Longview at the
amount allocated by LDNG for such properties.
24. This court retains exclusive jurisdiction to interpret and enforce
the provisions of this order, the APA and any related agreement to which
Costilla is a party.
Signed this 9th day of June, 2000.
/s/ Ronald B. King
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RONALD B. KING
UNITED STATES BANKRUPTCY JUDGE
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