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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF LOUISIANA In re: CASE NO. 11-13028 VIRGIN OFFSHORE USA, INC. SECTION A Involuntary Debtor CHAPTER 11 ****************************************************************************** MEMORANDUM IN SUPPORT OF CENTURY EXPLORATION NEW ORLEANS, LLCS OBJECTION TO FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED MARCH 28, 2013, PROPOSED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE USA, INC. MAY IT PLEASE THE COURT: This memorandum is respectfully submitted by undersigned counsel and on behalf of Century Exploration New Orleans, LLC f/k/a Century Exploration New Orleans, Inc. (Century Exploration), in support of its Objection to First Amended Chapter 11 Plan of Reorganization [P428] (Objection), for the following reasons: I. FACTS Century Exploration and the Trustee in the captioned case are parties to certain executory contracts, including, but not limited to, a Joint Development Agreement and an Offshore Operating Agreement, pertaining to the exploration, development, production and operation of oil and gas leases covering certain submerged lands offshore from the State of Louisiana in the Gulf of Mexico known as the Ship Shoal area. Century Exploration is the Operator under these agreements. The Trustee has not yet assumed these executory contracts but seems to say in his Plan that he is doing so through the Plan. Attached to the Objection, as Exhibit 1, is the most recent estimate by Century Exploration of the P&A liability for both currently producing wells and those which are not producing for the parties

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to the Ship Shoal agreements. The Debto rs share totals $1,047,217. Of that amount , the Debtors share of P&A liability for wells which have already ceased production is roughly $414,000.

II.

LAW AND ARGUMENT Century Exploration shows the Trustee has not met his burden of proving that he will provide

adequate assurance of future performance with regard to his P&A liabilities under the executory contracts. Also, his method of cure for pre-petition default is not prompt. The Trustee has the burden of proof to show assurance of future performance in addition to cure and compensation for prior defaults. In re Texas Health Enterprises Inc., 72 F. App'x 122, 126 (5th Cir. 2003). The question of whether the trustee has met his burden is a fact-intensive

question governed by commercial reality to determine whether the debtor's financial data indicated its ability to generate an income stream sufficient to meet its obligations, the general economic outlook in the debtors, including consider[ation of] whether the debtors financial data industry, and the presence of a guarantee. Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1309-10 (5th Cir. 1985); In re Liljeberg Enterprises, Inc., 304 F.3d 410, 438-39 (5th Cir. 2002) ([T]o determine if the debtor in possession has provided adequate assurance of future performance, we have held that courts must look to factual conditions indicated its ability to generate an income stream sufficient to meet its obligations, *439 the general economic outlook in the debtors industry, and the presence of a guarantee.); In re Patriot Place, Ltd., 486 B.R. 773, 801 (Bankr. W.D. Tex. 2013) (According to the Fifth Circuit, what constitutes adequate assurance of future performance is extremely fact -specific. In re Texas Health Enterprises Inc., 72 Fed.Appx. 122, 126 (5th Cir.2003). Factors the Fifth Circuit has used in assessing whether a debtor has provided adequate assurance of future performance under a lease include (1) whether the debtors financial data

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indicates its ability to generate an income stream sufficient to meet its obligations; (2) the general economic outlook in the debtors industry; and (3) the presence of a guarantee. Id. (citing Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1310 (5th Cir.1985)). Additional factors that courts have examined include (1) the debtors payment history; (2) presence of a security deposit; (3) evidence of profitability; (4) plan that would earmark money exclusively for the landlord; and (5) whether the unexpired lease is at, or below, the prevailing rate. See e.g., Fine Lumber, 383 B.R. at 573.) During the course of this case, Century Exploration had been advised that funds existed specifically for the future P&A liability of the Debtor for the Ship Shoal wells. However, apparently no such funds currently exist. Century Exploration learned this fact only within the last two weeks. While Century Exploration is optimistic that a mechanism to assure payment of all future expenses can be worked out among the parties, to date, there is no agreement as to such a mechanism. Here, the Trustee has not shown that he can or will pay the Debtors share of existing P&A obligations for those wells which are currently non-producing. There appears to be no item in the

budget for this necessary expense. As for future P&A responsibilities, there is no showing that the funds which will be put into escrow for future P&A will be secured for those purposes or that they will be sufficient. The funds attributable to the Ship Shoal area account for roughly 93% of the Debtors gross revenue. Without those funds, the Debtors case must be converted. As for the Trustees offer to cure pre-petition monetary defaults through seven months of installment payments, under the circumstances of this case, that is not the prompt cure required by the code. The Trustee was appointed in this case on October 11, 2011. He has enjoyed the benefits of the subject executory contracts since that time and is apparently current on post petition joint interest billings. Likewise, all production payments owed to the Debtors estate have been paid. However,

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now, twenty (20) months later, to extend payment of the pre-petition monetary default for seven additional months is not the prompt cure mandated by the Code.

III.

CONCLUSION For the foregoing reasons, Century Exploration New Orleans, LLC f/k/a Century Exploration

New Orleans, Inc. objects to the confirmation of the First Amended Chapter 11 Plan of Reorganization [P-402] proposed by Gerald H. Schiff, Chapter 11 Trustee for the Bankruptcy Estate of Virgin Offshore USA, Inc. Respectfully submitted; STEFFES, VINGIELLO & McKENZIE, LLC By: /s/ Arthur A. Vingiello___________________ ARTHUR A. VINGIELLO (LA Bar #13098) 13702 Coursey Blvd., Building 3 Baton Rouge, Louisiana 70817 Telephone: (225) 751-1751 Facsimile: (225) 751-1998 E-mail: avingiello@steffeslaw.com Attorneys for Century Exploration New Orleans, LLC f/k/a Century Exploration New Orleans, Inc.

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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF LOUISIANA In re: CASE NO. 11-13028 VIRGIN OFFSHORE USA, INC. SECTION A Involuntary Debtor CHAPTER 11 ****************************************************************************** CERTIFICATE OF SERVICE I HEREBY CERTIFY that a copy of the above and foregoing MEMORANDUM IN SUPPORT OF CENTURY EXPLORATION NEW ORLEANS, LLCS OBJECTION TO FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED MARCH 28, 2013, PROPOSED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE USA, INC. has this day been served upon the following parties of interest:
Office of U.S. Trustee Eastern District of Louisiana 400 Poydras Street, Suite 2110 New Orleans, LA 70130 Specialty Rental Tools & Supply, LLC and Sooner Pipe, LLC c/o Albert J. Derbes, IV THE DERBES LAW FIRM, LLC 3027 Ridgelake Drive Metairie, LA 70011-8176 Dynamic Energy Services, LLC c/o Michael A. Crawford Taylor, Porter, Brooks & Phillips, LLP P.O. Box 2471 Baton Rouge, LA 70821-2471 Virgin Offshore USA, Inc. c/o Rick M. Shelby 201 St. Charles Avenue, Ste. 4000 New Orleans, LA 70170-4000 Official Committee of Unsecured Creditors of Virgin Oil Company, Inc. c/o Benjamin Kadden & Stewart F. Peck Lugenbuhl, Wheaton, Peck, Rankin 601 Poydras St., Suite 2775 New Orleans, LA 70130 Precision Drilling, LP c/o H. Kent Aguillard Young, Hoychick and Aguillard P.O. Box 391 Eunice, LA 70535 Helis Oil & Gas Co., LLC c/o J. David Forsyth Sessions, Fishman, Nathan & Israel, LLP 201 St. Charles Ave., Ste. 3815 New Orleans, LA 70170 Virgin Offshore USA, LLC c/o Douglas S. Draper & Tristan Manthey Heller, Draper, Hayden, Patrick & Horn, LLC 650 Poydras Street, Ste. 2500 New Orleans, LA 70130-6103 Tanner Services, LLC c/o Jacque B. Pucheu, Jr. Pucheu, Pucheu & Robinson, LLP P.O. Box 1109 Eunice, LA 70535

by depositing same in the U.S. mail, postage prepaid, and properly addressed. I HEREBY FUTHER CERTIFY that a copy has also been served upon the following parties by electronic notice via the Courts CM/ECF system:
H. Kent Aguillard, kaguillard@yhalaw.com Brent B. Barriere, barrier@phelps.com Raymond A. Beyt, rab@beytlaw.com Frederick L. Bunol, fbunol@derbeslaw.com, dharvey@derbeslaw.com Jeffrey M. Burmaster, jburmaster@kingkrebs.com

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Christopher T. Caplinger, ccaplinger@lawla.com, treeves@lawla.com Jeffery D. Carruth, jcarruth@wkpz.com Leo D. Congeni, leocongeni@bellsouth.net Michael A. Crawford, mike.crawford@taylorporter.com Albert J. Derbes, ajdiv@derbeslaw.com, jbourdeaux@derbeslaw.com Carl Dore, carldore@doreassociates.com, kevin@doreassociates.com Steven G. Durio, durio@dmsfirm.com, bsandoz@dmsfirm.com Stanwood R. Duval, stan@duvallawfirm.com J. David Forsyth, jdf@sessions-law.com Tanya N. Garrison, tgarrison@wkpz.com Mark S. Goldstein, mgoldstein@lowestein.com, abendana@lowestein.com Robert C. Gravolet, Robert.Gravolet@usdoj.gov, Adaline.L.Patterson@usdoj.gov Thomas G. Gruenert, tgruenert@ggzlawfirm.com, kkeeling@ggzlafirm.com George B. Jurgens, gjurgens@kingkrebs.com, gchristian@kingkrebs.com Benjamin Kadden, bkadden@lawla.com Omar F. Kuebel, nobankecf@lockeliddell.com Dewey H. Lane, dewlane@gmail.com Armistead M. Long, along@gordonarata.com, sroberts@gordonarata.com Mark Mintz, mmintz@joneswalker.com, sliberio@joneswalker.com Louis M. Phillips, lphillips@gordonarata.com Patricia Williams Prewitt, pwp@pattiprewittlaw.com Jacque B. Pucheu, jacque@pprlaw.com, jvienne@pprlaw.com Ryan J. Richmond, rrichmond@gordonarata.com E. Kathleen Shahan, kathie.shahan@usdoj.gov Patrick M. Shelby, pshelby@gordonarata.com Paul N. Temple, pntemple@energycapllc.com Thomas J. Smith, tsmith@gjtbs.com, crose@gjtbs.com, chickman@gjtbs.com Office of the U.S. Trustee, USTPRegion5.NR.ECF@usdoj.gov Dennis J. Vidrine, dennisv@vidrinelaw.com David F. Waguespack, Waguespack@carverdarden.com, docket@carverdarden.com, plaisanace@carverdarden.com Guy E. Wall, gwall@wallbulling.com, melon@wallbulling.com Kristin N. Wallis, kwallis@csj-law.com, lderry@csj-law.com Timothy A. York, tyork@qsclpc.om

Baton Rouge, Louisiana this 12th day of June, 2013.

______/s/ Chad E. Biggs_____ CHAD E. BIGGS

Respectfully Submitted by: Arthur A. Vingiello (#13098) Steffes, Vingiello & McKenzie, LLC 13702 Coursey Blvd., Building #3 Baton Rouge, Louisiana 70817 Telephone: (225) 751-1751 Facsimile: (225) 751-1998 E-mail: avingiello@steffeslaw.com Attorneys for Century Exploration New Orleans, LLC f/k/a Century Exploration New Orleans, Inc.