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Articles Tagged with oil and gas losses

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Oil Drilling RigsHard Rock Exploration, Inc. (“Hard Rock”) of Charleston, West Virginia and certain of its affiliate entities, including Blue Jacket Gathering LLC, Blue Jacket Partnership, Caraline Energy Company, and Brothers Realty, LLC (“Hard Rock Affiliates”), are independent oil and gas development companies.

On September 5, 2017, Hard Rock and Hard Rock Affiliates filed for bankruptcy protection in the Southern District of West Virginia Bankruptcy Court (2:17-bk-20459).  Shortly after filing for Chapter 11 bankruptcy, Hard Rock reported a monthly cash flow shortage of $325,000.  According to Hard Rock’s lender, Huntington National Bank, “rehabilitation of the Debtors’ business is impossible” due to their ongoing hemorrhaging of cash.

Hard Rock and Hard Rock Affiliates operate approximately 390 well sites in the Appalachian Basin.  In addition, Caraline Energy Co. owns and maintains approximately 365 miles of pipeline developed to support natural gas collection.

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Oil Drilling RigsInvestors in various oil drilling programs offered by Vista Resources, Inc. (“Vista”), may be able to recover losses sustained on their investment through arbitration before FINRA, in the event that the investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment — including its risk components — was misrepresented by the advisor and his or her brokerage firm.  Founded in 1987, Vista is headquartered in Pittsburgh, PA.  Over the course of the past several decades, Vista has managed roughly 60 drilling programs, typically structured as industry joint ventures or limited partnerships.

Included among Vista’s recent programs are: Vista Drilling Program 2011-1, Vista Drilling Program 2012, and Vista Drilling Program 2013-2 (collectively, “Vista Programs”).  These Vista Programs are extremely complex and risky investment vehicles, for a number of reasons.  To begin, these private oil and gas investments charge very high fees to investors.  For example, Vista charges investors an approximate 10% up-front commission.  In addition, Vista charges an approximate 12% markup fee on the costs associated with drilling for productive oil reserves.  Such high up-front commissions and fees act as an immediate “drag” on the initial investment, and present significant risk to the uninformed retail investor.

Further, these Vista Programs are allowed to use up to 20% of investor capital to drill speculative exploratory wells.  A broker recommending such an investment has a duty to inform the investor of such risks, and of the capital-intensive and speculative nature of oil drilling as an investment.  Moreover, the brokerage firm — and by extension, the broker — recommending such an investment, have a duty to first conduct due diligence on the investment.

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Oil production and the pipelineInvestors in the Triloma EIG Energy Income Fund (the “Triloma Perpetual Fund”) and the Triloma EIG Energy Income Fund – Term I (the “Triloma Term Fund”) (collectively, the “Triloma Funds”) may be able to recover their investment losses through FINRA arbitration, in the event that the investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the financial advisor.  The Triloma Funds are publicly registered, unlisted closed-end management investment companies under the Investment Company Act of 1940 (’40 Act) that focus on investing in privately originated energy company and energy project debt.  The Triloma Funds are managed by Triloma Energy Advisors and EIG Credit Management Company.

On March 26, 2018, the Board of Trustees of the Funds approved a plan of liquidation of each respective fund, authorizing the liquidation and dissolution of the Triloma Funds.  Pursuant to the liquidation plan, the Triloma Funds will not engage in any further business activities, except for the purpose of winding down operations and business affairs.  Further, in accordance with the plan of liquidation, the Boards agreed to terminate each funds’ respective distribution reinvestment plan and previously approved monthly distributions.

Under the plan of liquidation, the Triloma Funds have agreed to sell their originated investments to a third-party and will use a portion of the proceeds to pay all of their outstanding debts, claims and obligations.  Triloma Funds’ shareholders can expect to receive an initial cash liquidating distribution on or about May 15, 2018.  To the extent that any assets might remain after such liquidation payments and satisfaction of final expenses, there will be a second liquidating distribution above a threshold of $100 per shareholder made on or before June 30, 2018.

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