On April 2, 2018, EV Energy Partners, L.P. (“EVEP”) filed for Chapter 11 bankruptcy in the District of Delaware (Case No. 18-10814 (CIS)). While EVEP continues to operate its business, it now seeks to implement a prepackaged plan of reorganization, under which equity investors who purchased EVEP Units will likely sustain significant losses.
Investors who bought into EVEP upon a recommendation by their broker or financial advisor may be able to recover their losses in FINRA arbitration, in the event the recommendation to invest lacked a reasonable basis, or if the investment was solicited through a misleading sales presentation. EVEP is a publicly traded master limited partnership (“MLP”) specializing in the acquisition and operation and development of onshore oil and gas properties in the continental United States. EVEP’s holdings include oil and gas properties in the Barnett Shale, the San Juan Basin, the Appalachian Basin, as well as the Permian Basin.
As most recently reported, under the currently proposed plan of reorganization, EVEP Unitholders will receive 5% of the new entity (post-bankruptcy), with 5-year warrants to buy up to 8% of the reorganized company’s new equity.
MLPs like EVEP operate in what is known as the upstream of the oil and gas sector, meaning that segment of the market that focuses on energy exploration and production (E&P), as opposed to the more well-known midstream MLPs that primarily transport oil and natural gas by pipeline, barge, etc. Due in part to the risks associated with locating productive reserves and the cost-intensive nature of oil and gas exploration, the upstream market is very risky. Based upon publicly available information, of the 13 companies doing business as upstream MLPs in recent years (post-2008 crisis), 11 of the 13 are now defunct or reorganized due to mergers, bankruptcies, or changed business models.
When recommending an oil and gas investment to a customer, a brokerage firm — and by extension the broker — has a duty to first conduct due diligence on the investment. In addition, an oil and gas investment is unique and carries certain risks associated with the volatile nature of the underlying commodity. Further, the financial advisor recommending such an investment has a duty to determine if the investment is suitable in light of the investor’s profile and stated investment objectives. In instances where an investor’s account becomes over-concentrated in oil and gas investments, or a broker fails to disclose the risks associated with such an investment or investment strategy, the broker and his or her firm may well be liable for losses on the investment.
The attorneys at Law Office of Christopher J. Gray, P.C. have experience in representing investors in oil and gas investments, including investors in futures and options, oil and gas private placements, drilling funds, and other energy-related investment products. Investors may contact a securities arbitration lawyer at (866) 966-9598 or via email at firstname.lastname@example.org for a no-cost, confidential consultation.