Scanrock Oil and Gas: 206-Day Battle to Confirmation

When a Texas oil and gas company files for chapter 11 protection, the proceeding typically involves negotiations between the debtor and its secured lenders. The Scanrock Oil and Gas bankruptcy followed a different path. Within months of the February 2025 petition, the case involved multiple contested matters: the U.S. Trustee moved to appoint a chapter 11 trustee, the Official Committee of Unsecured Creditors pursued substantive consolidation, and the primary secured lender sought conversion to chapter 7 liquidation. An ad hoc group of royalty interest owners organized and sought committee representation, while the U.S. Small Business Administration objected to the proposed plan. The case took 206 days to resolve, with a conditional confirmation on August 19, 2025 after the debtor settled with multiple objecting parties.

Scanrock Oil and Gas, Inc. and its affiliated entities operated as exploration and production companies in Texas, holding mineral rights and managing royalty interests across their portfolio. The company had accumulated approximately $50 million in secured debt owed to Prosperity Bank, a regional Texas lender that was the case's primary secured creditor. Like many independent producers, Scanrock faced declining commodity prices—with WTI crude hitting near five-year lows below $56 per barrel by late 2025—and rising interest rates that hampered liquidity. The company was in default under its Prosperity credit agreement when it filed chapter 11 petitions in Houston on February 9, 2025.

The ensuing case is an example of contested chapter 11 litigation: governance concerns that prompted U.S. Trustee intervention, unsecured creditor committee attempts to consolidate multiple debtor entities, royalty holders asserting Texas statutory super-priority protections, and a regional bank that sought conversion to chapter 7. The confirmation that ultimately emerged—followed by post-confirmation adversary proceedings and counsel substitution in December 2025—shows that contested matters can extend beyond the confirmation hearing itself.

Debtor(s)	Scanrock Oil and Gas, Inc., et al.
Court	U.S. Bankruptcy Court, Southern District of Texas (Houston Division)
Case Number	25-90001 (Jointly Administered)
Petition Date	February 9, 2025
Plan Type	Amended Joint Chapter 11 Plan of Reorganization
Confirmation Date	September 3, 2025
Days to Confirmation	206
Prepetition Secured Debt	$50 million (Prosperity Bank)
Largest Unsecured Creditor	Halliburton Energy Services
Chief Restructuring Officer	Brad Walker (Riverbend Special Situations Group)
Debtor Counsel	Munsch Hardt Kopf & Harr, P.C. (pre-confirmation); Rochelle McCullough LLP (post-confirmation)
UCC Counsel	Porter Hedges LLP
Claims Agent	Stretto, Inc.

Company Background and Business Operations

Scanrock Oil and Gas, Inc. operated as a Texas-based exploration and production company focused on oil and gas extraction, mineral rights holdings, and royalty interests management. The company's operations were exposed to commodity price volatility that affected cash flow.

The chapter 11 filing encompassed multiple affiliated debtor entities, which were jointly administered under Case Number 25-90001. The debtors retained Brad Walker of Riverbend Special Situations Group as Chief Restructuring Officer to navigate the restructuring process. Riverbend provides interim executive services for companies in financial and operational distress, supplying C-level managers with situational awareness and industry experience.

Capital Structure and Prepetition Debt

Prosperity Bank Secured Debt

The company's capital structure was dominated by a $50 million secured loan from Prosperity Bank, a regional Texas financial institution. Prosperity Bank is one of the largest banks in Texas, with over 280 locations and approximately $36 billion in assets. The bank ranks among the top 100 U.S. banks in total assets and holds the number two position in Texas—and top 25 nationally—for farm lending.

Prosperity's regional presence in Texas oil country had expanded through acquisitions. In April 2024, Prosperity finalized its acquisition of Lone Star State Bank of West Texas (Lubbock), further consolidating its relationships with energy producers in the Permian Basin and surrounding regions. The bank had previously acquired FirstCapital Bank of Texas (Midland), deepening its exposure to the oil and gas sector.

When Scanrock defaulted under the Prosperity credit agreement, the lender objected to the debtor's proposed plan and sought conversion to chapter 7 liquidation.

Unsecured Creditors and UCC Formation

The U.S. Trustee announced appointment of a four-member Official Committee of Unsecured Creditors to represent unsecured creditor interests in the case. Halliburton Energy Services was identified as Scanrock's largest unsecured creditor and was included on the committee. Halliburton's participation on the UCC reflected vendor exposure of major oilfield services companies to independent E&P operators—equipment providers, drilling contractors, and completion services firms that accumulate receivables during the exploration and production process.

The UCC retained Porter Hedges LLP as committee counsel. Porter Hedges, a Houston-based firm founded in 1981, has been recognized by Chambers USA as "Bankruptcy Firm of the Year" in Texas. The firm brought substantial experience in energy sector unsecured creditor representation, having previously served as UCC counsel in major oil and gas bankruptcies including ATP Oil and Gas Corporation ($2.8 billion), Breitburn Energy Partners L.P. ($2.9 billion), Sabine Oil & Gas Corporation ($2.9 billion), Brazos Electric Power Cooperative ($2.34 billion), and Bristow Group ($2 billion).

The committee also retained Riveron RTS, LLC—formerly known as Conway MacKenzie—as financial advisor. Riveron acquired the legacy turnaround and restructuring firm Conway MacKenzie in 2019, bringing specialized UCC advocacy capabilities focused on negotiating between debtors and other constituencies.

Ad Hoc Royalty Interest Owners Group

Beyond traditional secured and unsecured creditor constituencies, Scanrock's case featured the organization of an Ad Hoc Royalty Interest Owners Group—royalty holders who receive payments based on oil and gas production from leased mineral interests. The ad hoc group sought appointment of an official committee to represent royalty holder interests, filing a motion that became one of the most referenced documents in the docket.

Royalty holders have statutory protections in Texas oil and gas bankruptcies. Under Texas Business & Commerce Code Section 9.343, royalty creditors are afforded statutory protections that create near-secured status. Unlike typical secured creditors, royalty owners do not need to file financing statements to perfect their security interests—their interests are automatically perfected upon recording of the underlying oil and gas lease. Moreover, the Texas Legislature designated royalty security interests as "purchase-money security interests" carrying super-priority.

This legal framework gives royalty holders secured-like status in E&P bankruptcies. Oil and gas leases represent the primary asset of most operators; to prevent lease termination, debtors frequently obtain bankruptcy court authority to keep royalty payments current. The Ad Hoc Royalty Interest Owners Group filed plan objections and reached a settlement before confirmation.

Path to Distress

Commodity Price Decline

Scanrock's financial distress reflected challenges confronting independent oil and gas producers throughout the 2024-2025 period. Court filings attributed the company's difficulties to "repeated downturns in oil and gas prices" that had hampered liquidity over several years.

By late 2025, these price pressures had intensified. Brent crude settled at $60.56 per barrel while WTI traded at $56.82 per barrel in December 2025. On December 16, 2025, WTI crude hit $55.53 per barrel—marking a near five-year low and representing a decline of over 20 percent year-over-year.

Rising Interest Rates and Liquidity Constraints

The commodity price environment coincided with a period of rising interest rates that hampered liquidity. Scanrock was in default under the $50 million Prosperity Bank facility.

The Dallas Fed Energy Survey from the fourth quarter of 2024 captured the prevailing industry sentiment: oil and gas companies expected to maintain a conservative stance toward production growth, prioritizing capital discipline over expansion. Past downturns in oil and gas markets had led to surges in bankruptcies, loan defaults, and impaired asset quality for banks—lessons that informed both producer caution and lender reluctance to extend additional credit.

Default and Filing Trigger

Scanrock Oil and Gas filed chapter 11 petitions in the Southern District of Texas on February 9, 2025.

Chapter 11 Filing and First Day Relief

Petition and Initial Motions

Scanrock Oil and Gas and its affiliated debtors filed chapter 11 petitions on February 9, 2025, initiating jointly administered proceedings under Case Number 25-90001. Chief Restructuring Officer Brad Walker filed a First Day Declaration outlining the circumstances leading to the filing and the relief sought to stabilize operations.

The debtors filed the standard set of first day motions: cash collateral authorization, employee wages, critical vendors, utilities, and insurance. These motions sought interim authority to continue business operations during the early case period.

Cash Collateral Authorization

The Cash Collateral Motion filed on the petition date became the most referenced document in the entire docket—cited in 67 subsequent filings. Prosperity Bank, as the prepetition secured lender, held security interests in substantially all of the debtors' assets.

The debtors retained Munsch Hardt Kopf & Harr, P.C. as lead bankruptcy counsel. Munsch Hardt maintains one of the largest bankruptcy practices in the Southwest, having been recognized by Chambers USA in Texas continuously from 2005 through 2025. The firm received the Turnaround Atlas Award for Chapter 11 Restructuring of the Year in 2017 and has more than 160 attorneys across offices in Dallas, Austin, and Houston. The firm's Austin-based bankruptcy shareholder Jay Ong—named Lawyer of the Year by The Best Lawyers in America for Bankruptcy Litigation in both 2024 and 2026—has commented on the contentious nature of restructurings and asset sales in the current wave of oil and gas bankruptcies.

Lain, Faulkner & Co., P.C. served as the debtors' financial advisor. The Dallas-based CPA firm specializes in services for troubled companies, providing support through all phases from pre-bankruptcy through reorganization or liquidation. With a 40-year history, the firm's members frequently serve as chief restructuring officers, chapter 11 trustees, post-confirmation trustees, and court-appointed examiners or receivers.

Stretto, Inc. was retained as claims and noticing agent. Stretto provides claims administration and noticing services using proprietary case-management software, operating the industry's only print-production facilities dedicated to bankruptcy legal noticing.

Contested Matters and Litigation

The Scanrock case included multiple contested matters involving the debtors' management, corporate structure, and proposed plan of reorganization.

U.S. Trustee Motion to Appoint Chapter 11 Trustee

The U.S. Trustee filed a motion seeking appointment of a chapter 11 trustee. The motion was referenced 19 times in subsequent docket filings.

The U.S. Trustee Program is required to move for appointment of a trustee when there are "reasonable grounds to believe" that parties in control of the debtor participated in actual fraud, dishonesty, or criminal conduct. Courts may also order trustee appointment for cause under 11 U.S.C. § 1104(a)(1), which encompasses fraud, dishonesty, incompetence, or gross mismanagement of the debtor's affairs by current management. Alternatively, Section 1104(a)(2) provides for appointment if it is in the interests of creditors, equity holders, and the estate.

The motion sought appointment of a trustee under the statutory standards governing chapter 11 trustee appointments.

UCC Motion for Substantive Consolidation

The Official Committee of Unsecured Creditors filed a motion seeking substantive consolidation of the debtor entities. This motion was referenced 15 times in the docket.

Substantive consolidation is an equitable remedy that combines the assets and liabilities of one or more entities and treats them as belonging to a single enterprise. The remedy is not expressly authorized by the Bankruptcy Code; rather, it is a product of judicial gloss, with courts finding authority in the broad equitable powers granted under Section 105(a). Courts consistently hold that substantive consolidation is to be used sparingly as an "extraordinary remedy."

The UCC's motion sought to combine the assets and liabilities of the debtor entities for plan and distribution purposes. For unsecured creditors, consolidation can simplify case administration and potentially enhance recoveries by pooling assets against combined liabilities. For secured creditors and others who relied on separate entity treatment, consolidation can dilute their positions.

Ad Hoc Royalty Interest Owners Group Committee Motion

The Ad Hoc Royalty Interest Owners Group filed a motion seeking appointment of an official committee to represent royalty holder interests. This motion became the second most referenced document in the docket, cited 22 times—exceeded only by the Cash Collateral Motion.

Under Texas law, royalty interests carry statutory super-priority protections. The ad hoc group's organization and committee motion, along with plan objections, made royalty holder issues a central part of the case.

The group also filed objections to the proposed plan and reached a settlement before confirmation.

Prosperity Bank Conversion Motion and Plan Objection

Prosperity Bank, the $50 million secured lender, filed both a motion to convert the case to chapter 7 liquidation and objections to the debtor's proposed plan of reorganization.

If granted, conversion would end the debtor's reorganization efforts and initiate liquidation under a chapter 7 trustee.

Prosperity Bank's plan objection and conversion motion were central to the contested proceedings.

Additional Plan Objections

Multiple additional parties filed objections to the debtor's proposed plan:

The U.S. Small Business Administration participated in the case. SBA loans are dischargeable in business bankruptcy, but the agency objected to its proposed treatment, requiring settlement resolution before confirmation.

The breadth of objections—spanning secured lenders, royalty holders, individual creditors, and federal agencies—required resolution before confirmation.

Plan Development and Confirmation

Original Plan: Property Sale Strategy

The debtors filed their original Chapter 11 Plan and Disclosure Statement proposing to repay debt primarily through property sales. The plan contemplated disposition of multiple assets, including the Ochoco Ranch, with sale proceeds funding creditor distributions.

The plan proposed to fund creditor distributions through asset dispositions while the case moved through contested objections.

Amended Joint Plan

On July 3, 2025, the debtors filed an Amended Joint Chapter 11 Plan and Amended Disclosure Statement.

The amended plan and disclosure statement were filed approximately five months after the petition date.

Disclosure Statement Approval

In August 2025, a Texas bankruptcy judge approved the disclosure statement for creditor voting, allowing the debtors to solicit acceptances despite ongoing contested objections. Disclosure statement approval allowed the debtors to solicit creditor votes.

Settlement and Conditional Confirmation

On August 19, 2025, a Texas bankruptcy judge conditionally confirmed the chapter 11 plan after the debtor resolved objections from multiple parties. The settlements reached with objecting constituencies included:

• Ad Hoc Royalty Interest Owners Group - Settlement addressing royalty holder treatment
• Certain Individual Creditors - Resolution of personal objections
• U.S. Small Business Administration - Settlement of SBA loan objection

The conditional confirmation followed settlement of the outstanding objections.

Final Confirmation Order

The Confirmation Order was entered on September 3, 2025—206 days after the February 9 petition date.

The 206-day confirmation period included:

• Organization and response to the U.S. Trustee trustee motion
• Litigation of the UCC substantive consolidation motion
• Negotiation with the Ad Hoc Royalty Interest Owners Group
• Defense against Prosperity Bank's conversion motion
• Settlement of multiple plan objections
• Disclosure statement litigation and approval
• Creditor solicitation and voting

Post-Confirmation Administration

Adversary Proceeding

In December 2025, an adversary proceeding (Case No. 25-09033) was filed in connection with the bankruptcy estates.

Counsel Substitution

On December 5, 2025, the debtors filed a motion to substitute counsel, seeking to replace Munsch Hardt Kopf & Harr with Rochelle McCullough LLP as bankruptcy counsel for post-confirmation administration.

Rochelle McCullough is a Dallas-based bankruptcy and commercial litigation firm established in 1993. With over a century of combined bankruptcy experience among its partners, the firm has a tradition in insolvency work stretching back more than 65 years. Representation of court-appointed fiduciaries—including chapter 11 trustees and post-confirmation trustees—is a staple of the practice.

The substitution of Rochelle McCullough for Munsch Hardt followed confirmation.

Industry Context: Oil and Gas Restructuring Dynamics

Commodity Price Environment

The Scanrock bankruptcy occurred during a period of commodity price weakness affecting independent oil and gas producers. By December 2025, WTI crude had declined to the $55-57 per barrel range—representing a greater than 20 percent year-over-year decline and approaching five-year lows.

This price environment reduced revenue for producers. The Dallas Fed observed that past downturns had led to "surges in bankruptcies, loan defaults and impaired asset quality for banks."

Secured Debt Challenges

Regional banks with significant energy sector exposure—like Prosperity Bank—participated as secured lenders in oil and gas restructurings.

Royalty Holder Dynamics

Texas Business & Commerce Code Section 9.343 affords royalty holders statutory protections. Debtors frequently seek authority to continue royalty payments during bankruptcy to prevent lease termination.

Key Timeline

Frequently Asked Questions

What caused Scanrock Oil and Gas to file for bankruptcy?

Scanrock filed chapter 11 due to default under a $50 million secured loan owed to Prosperity Bank. Court filings attributed the default to repeated oil and gas price downturns coupled with rising interest rates that hampered the company's liquidity over several years.

Why did the U.S. Trustee file a motion to appoint a chapter 11 trustee?

The U.S. Trustee Program is required to seek trustee appointment when there are reasonable grounds to believe that parties controlling the debtor participated in fraud, dishonesty, or criminal conduct. Courts may also appoint trustees for cause including gross mismanagement. The specific allegations underlying the Scanrock trustee motion are not detailed in available sources.

What is substantive consolidation and why did the UCC pursue it?

Substantive consolidation is an extraordinary equitable remedy that combines the assets and liabilities of multiple entities and treats them as a single enterprise. The Official Committee of Unsecured Creditors sought substantive consolidation to potentially simplify case administration and enhance unsecured creditor recoveries by pooling assets against combined liabilities. The remedy is not expressly authorized by the Bankruptcy Code and courts apply it sparingly.

Who are the royalty interest owners and why were they significant in this case?

Royalty holders receive payments based on oil and gas production from leased mineral interests. Under Texas law, royalty creditors have automatic super-priority security interests that do not require financing statement perfection. This statutory protection made the Ad Hoc Royalty Interest Owners Group a creditor constituency whose objections required settlement before plan confirmation.

Why did Prosperity Bank seek to convert the case to chapter 7?

As the $50 million secured lender holding security interests in substantially all debtor assets, Prosperity Bank filed a conversion motion and plan objections.

How long did the bankruptcy case take from filing to confirmation?

The case took 206 days from the February 9, 2025 petition to the September 3, 2025 confirmation order.

What settlements were required before confirmation?

The debtor resolved objections from the Ad Hoc Royalty Interest Owners Group, certain individual creditors, and the U.S. Small Business Administration before achieving conditional confirmation on August 19, 2025.

What was the plan's strategy for paying creditors?

The confirmed plan proposed to pay debt primarily through property sales, including disposition of the Ochoco Ranch and other assets. Sale proceeds would fund distributions to creditors according to the plan's treatment provisions.

Why was debtor counsel substituted after confirmation?

Rochelle McCullough LLP replaced Munsch Hardt Kopf & Harr as debtor counsel post-confirmation for ongoing case administration. Rochelle McCullough specializes in fiduciary representation including post-confirmation trustee work.

Is there ongoing litigation after the plan was confirmed?

Yes. An adversary proceeding (Case No. 25-09033) was filed in December 2025.

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For more analysis of oil and gas restructurings and contested chapter 11 proceedings, explore additional coverage on the ElevenFlo blog.