Mechanic's and Materialman's Liens on Oil and Gas Properties in Texas


Prior articles in our series demonstrated ways to stretch a borrowing base and how to address defaults on oil and gas loans. If a producer ultimately finds itself with a shrunken borrowing base and limited liquidity, the producer in turn might not be able to pay balances due to its contractors. An unpaid contractor may be able to file a mechanic’s and materialman’s (“M&M”) lien on the producer’s mineral property. An M&M lien will encumber the producer’s oil and gas property, and by extension, its secured lender’s collateral. Depending upon the facts, the M&M lien could prime the secured lender’s lien. In any event, the existence of an M&M lien could violate a negative covenant in the producer’s credit agreement, resulting in a default. This alert provides an overview of the process for filing M&M liens on mineral property in Texas.

To read the full alert, click on the PDF linked below. Note: this article was updated on April 9, 2015.


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