In 2006, a New Jersey-based equity firm, Huff Energy Fund, invested $500 million with Longview Energy, a Dallas oil and gas firm. This investment entitled Huff to place two members on Longview’s board, as well as hold a 39% interest in the firm. According to the petition filed by Longview with the civil district court in Zavala County, Huff asked Longview to research drilling opportunities in the Eagle Ford Shale area of south Texas.
Longview did their research, finding an opportunity to lease mineral rights, just as the Eagle Ford Shale was becoming a desirable drilling location. Longview claims that after sharing this research with Huff, the Huff-appointed board members told Longview they would not providing financing for the Eagle Ford opportunity, yet within months, Huff spent $40 million on a separate Eagle Ford Shale project operated by a related company, Riley-Huff Energy.
In June of this year, the Zavala County court jury sided with Longview that Huff Energy breached their fiduciary responsibilities as Longview board members. The jury also agreed that Riley-Huff wrongfully obtained oil and gas assets as a result of this breach. A third related defendant, WRH Energy Partners, was also named in the suit.
The court ruled that the three Huff companies owe Longview over $95 million in prior revenues, all production since the verdict, and a 5% annual post judgement interest rate. Furthermore, Longview will be assigned mineral rights to 46,000 acres of leased in Zavala County with an estimated market value as high as $500 million.
Sources: Dallas Morning News, eaglefordshale.com