Can't Keep a Good (Gas) Man Down - Lost Profits from Late Plant Completion

Litigation, North America

Delays in the construction of gas gathering and processing (G&P) facilities led to a suit filed against the EPC contractor by a midstream company alleging lost profits. We reviewed G&P contracts, evaluated operating costs, and analyzed the gas quantities processed by competitors due to the late completion to quantify lost profits. The parties relied on Baker & O'Brien's expert reports and deposition testimony to reach a settlement.

Rapid growth in the U.S. shale oil and gas production led to investments to gather and process large amounts of natural gas. Output from many fields outgrew existing pipeline and gas processing infrastructure, limiting oil and gas production. In one area that was quickly approaching the capacity of its existing systems, several producers engaged a midstream company (Company) to build new gas gathering and processing (G&P) facilities. The Company hired an engineering, procurement, and construction (EPC) contractor to design and construct the new facilities (the Project).

The Project experienced delays, which cost hundreds of millions of dollars. The Company filed suit against the EPC Contractor, claiming the Project delays resulted in lost profits. Baker & O'Brien was engaged to opine on the Company's different profit sources and quantify lost profits caused by the late completion of the Project. Our investigation encompassed several activities, including:

  • Reviewing the G&P contracts between the Company and the producers;
  • Evaluating the new G&P facilities fixed and variable operating costs;
  • Analyzing producer gas production gathered and processed by competing midstream companies due to the late completion; and
  • Determining whether the Company's profits were truly lost or just delayed.

We submitted expert and rebuttal reports and provided deposition testimony in the lawsuit. Following our testimony, the parties reached a settlement.

Robert L. Beck

Senior Consultant

Industry
Natural Gas and NGLs
Service
Insurance Claims / Commerical Contracts / Litigation / Expert Witness Testimony
Region
North America