Validus Energy II Midcon LLC v. CPE Gathering Midcon, LLC

IN THE DISTRICT COURT OF BLAINE COUNTY STATE OF OKLAHOMA VALIDUS ENERGY II MIDCON LLC, Plaintiff, v. CPE GATHERING MIDCON, LLC; VIVAKOR, INC.; COYOTE OILFIELD SERVICES, LLC, F/K/A COYOTE MIDSTREAM, LLC; AND JOHN DOES 1-10, Defendants. CASE NO. CJ-2026-17 BLAINE COUNTY, OKLAHOMA FILED APR - 2 2026 CHRISTY MATLI, CT. CLERK BY DEPUTY VERIFIED PETITION Plaintiff, Validus Energy II Midcon LLC ("Validus" or "Plaintiff"), for its claims against Defendants, CPE Gathering Midcon, LLC ("CPE"); Vivakor, Inc. ("Vivakor"); Coyote Oilfield Services, LLC, f/k/a Coyote Midstream, LLC ("Coyote"); and John Does 1-10 ("John Does") (collectively "Defendants"), alleges and states as follows: PARTIES, JURISDICTION AND VENUE 1. Plaintiff, Validus Energy II Midcon LLC is a foreign limited liability company who conducts business within the State of Oklahoma. 2. Upon information and belief, Defendant, CPE Gathering Midcon, LLC is a foreign limited liability company who conducts business within the State of Oklahoma. 3. Upon information and belief, Defendant, Vivakor, Inc., is a foreign limited liability company who conducts business within the State of Oklahoma. 4. Upon information and belief, Defendant, Coyote Oilfield Services f/k/a Coyote Midstream, LLC, is a foreign limited liability company who conducts business within the State of Oklahoma. Verified Petition 5. Upon information and belief, Defendants, John Does 1-10, are individuals or entities who conduct business within the State of Oklahoma. 6. The Court has jurisdiction over the subject matter and the parties to this dispute. 7. Venue is proper in Blaine County, Oklahoma pursuant to 12 O.S. § 137 and 187. FACTUAL BACKGROUND 8. Validus owns and operates oil and gas wells across multiple counties in Oklahoma, including, but not limited to Blaine and Canadian Counties. 9. CPE owns and operates a crude oil gathering and storage facility located in Blaine County, Oklahoma (the “Facility”). 10. Validus and Defendant, CPE, entered into that certain Crude Oil Gathering and Dedication Agreement effective on the 17th day of March, 2017 (the “Agreement”). 11. Pursuant to the Agreement, Validus agreed to deliver crude oil produced from certain of its wells located within a dedicated area of interest to CPE’s gathering and storage facility. 12. Validus delivers thousands of barrels of crude oil to CPE’s Facility every day. 13. Validus’ crude deliveries to the Facility are metered and recorded at custody meters known as LACT Units. 14. The precise volumes of crude oil delivered and recorded at the LACT Units are closely monitored and reconciled between Validus and CPE on a regular basis. 15. Pursuant to the terms of the Agreement, Validus’ crude oil is stored at the Facility by CPE until Validus authorizes the release of specific barrels of crude oil for delivery to STACK Pipeline, LLC (“STACK”). Thereafter, the crude is transported to Cushing, Oklahoma for sale via the STACK pipeline. 16. Unbeknownst to Validus, and in complete violation of the Agreement, CPE released, delivered and/or sold in excess of 62,285 barrels of Validus’ crude oil. 17. CPE does not dispute that approximately 62,285 barrels of Validus’ crude oil are missing from storage at the Facility. 18. The current value of the crude oil that CPE wrongfully converted is in excess of Six Million Two Hundred and Fifty Thousand Dollars ($6,250,000.00). 19. CPE attempts to explain this massive loss of crude oil on its own alleged improper blending of Validus’ crude oil with condensate or distillate from other third parties. 20. The Agreement allows CPE to commingle the crude oil that is delivered by Plaintiff with other crude oil; however, only “Crude Oil” as defined by the Agreement may be commingled with Plaintiff’s crude oil and the quality of the third-party crude oil must remain the same with respect to the API gravity and sulfur content, or exceed the same. 21. The Agreement defined “Crude Oil” as “crude oil produced from wells, which crude oil meets the quality specifications and restrictions set forth in Section 5.8 and has not been blended or mixed with other grades of crude oil or ‘indirect products.’ For the avoidance of doubt, ‘Crude Oil’ does not include indirect liquid products of oil or gas wells, sometimes referred to as ‘indirect products,’ meaning the liquid products resulting from the operation of gasoline recovery plants, gas recycling plants, condensate or distillate recovery equipment in gas or oil fields, or a mixture of such products.”1 22. In other words, the Agreement allows CPE to commingle the “Crude Oil” that is delivered by Plaintiff with “Crude Oil” from other producers; however, it does not allow CPE to commingle the “Crude Oil” that is delivered by Plaintiff with crude oil that has been blended or 1 Plaintiff hereby incorporates the Agreement’s definition of “Crude Oil.” Verified Petition mixed with other grades of crude oil or “indirect products,” such as condensate. 23. Upon information and belief, CPE allowed Coyote and other third parties to commingle their crude oil, which was blended or mixed with other grades of crude oil or “indirect products,” such as condensate, with the crude oil that was delivered to the Facility by Plaintiff. When this occurred, the quality of the crude oil delivered by Plaintiff was materially altered and API gravity of the crude oil delivered by Plaintiff was changed. 24. While CPE’s improper blending of condensate with Validus’ crude oil is certainly a breach of the Agreement and may have led to an improper reduction in the actual barrels of crude oil held in storage for Validus at the Facility, this breach alone does not account for the massive amount of crude oil currently missing from the Facility. 25. On information and belief, Vivakor may have received proceeds from the sale of crude oil belonging to Validus. 26. On information and belief, Coyote received crude oil belonging to Validus and sold such crude oil for its own benefit. 27. Additionally, as of the filing of this Petition, approximately 20,000 barrels of Plaintiff’s crude oil allegedly remain at the Facility and under the control of CPE, and are in danger of being sold or delivered to third parties without Plaintiff’s consent. 28. Upon information and belief, CPE is and has been insolvent, and is unable to pay their debts as they fall due. As of the filing of this Petition, Validus is aware of the following outstanding liabilities and matters gravely affecting CPE’s ability to remain a going concern: A. CPE is owned by Vivakor, and/or its subsidiary, Vivakor Transportation, LLC, and/or Vivakor Administration, LLC. Vivakor was formerly listed on The Nasdaq Stock Market. On December 19, 2025, Nasdaq notified the company that its common stock was subject to delisting after triggering the Low Priced Stocks Rule and failing to regain compliance with the $1.00 minimum bid requirement. Trading was suspended on December 26, 2025. B. CPE is a named defendant in a lawsuit filed on February 20, 2026 by the former Chief Financial Officer of Vivakor, Tyler Nelson. Mr. Nelson alleges that during his time as CFO of Vivakor, Vivakor acquired CPE. Thereafter, Mr. Nelson alleges that the formation of numerous, unnecessary subsidiaries and sub-subsidiaries were created with Ballengee as Chairman of the Board and CEO in order to be able to divert funds and hinder creditors from collecting. Mr. Nelson further alleges that Ballengee secretly began a series of transactions intended to hinder, delay, and defraud the Vivakor Defendants’ creditors, including Nelson. Mr. Nelson asserts claims for Actual Fraudulent Transfer, Constructive Fraud, and Common Law Fraudulent Transfer against CPE, Vivakor, and others in the United States District Court Central District of California, Case 2:26-CV-01885-DOC-DFM. Mr. Nelson seeks approximately $1,550,000.00 in damages from Vivakor, CPE and other related entities. C. On February 2, 2026, Vivakor allegedly executed a “non-binding Letter of Intent to sell its midstream business and transportation assets of CPE Gathering Midcon, LLC to Olenox Industries, Inc.” On February 9, 2026, Vivakor announced “that it has entered into forbearance agreements with eight investors holding the Company’s convertible promissory notes, extending maturities until 2027 and revising payment terms as part of its ongoing efforts to address its capital structure and support compliance with Nasdaq listing standards. Under the terms of the agreements, the noteholders have agreed to forbear from exercising default remedies, subject to Vivakor’s compliance with amended terms. The agreements extend the maturity of the notes to January 2027 and establish revised payment schedules requiring scheduled cash payments through maturity.” According to the press release, Vivakor Chairman and Chief Executive Officer James Ballengee, commented, “These agreements provide additional time and address our near-term obligations and align our capital structure as we complete the steps required to restore our Nasdaq listing. Our ability to extend and pay off these Noteholders is supported by our recently executed non-binding Letter of Intent to sell our midstream business and transportation assets of CPE Gathering MidCon, LLC to Olenox Industries, Inc. for approximately $36 million, which would be paid in a combination of cash, promissory note, common and preferred stock, and is based on $4.56 million in annual EBITDA, pursuant to a take-or-pay guarantee of Vivakor. Concurrently, we continue to evaluate strategic, operational, and financial alternatives to strengthen the Company’s long-term position.” D. On March 6, 2026, Maxus Capital Group, LLC recorded at Statement of Judgment against CPE, Vivakor, Inc. and others in the amount of $20,023,668.26. The judgment arises out of CPE and Vivakor’s default under a Forbearance Agreement due to failure to make payments under the terms of the Forbearance Agreement. The Forbearance Agreement arose out of Vivakor failure to timely make certain Weekly Installment Payments that were due to their lender which, as of October 8, 2025 were identified as being $2,259,319.89 and $5,685,805.13, respectively, including interest. CPE was an express Guarantor under the Forbearance Agreement. First Cause of Action Breach of Contract – CPE Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 29. The Agreement is a valid contract that is binding upon the parties. 30. In accordance with the terms of the Agreement, CPE was in full control of Validus’ Crude Oil upon CPE’s receipt of the same at the receipt points until such time as the crude oil was redelivered to Validus at the delivery point. 31. In violation of the terms of the Agreement, CPE transferred, delivered or sold approximately 62,285 barrels of Crude Oil belonging to Validus while such Crude Oil was in CPE’s possession, custody and control. 32. CPE has failed to maintain custody of the Crude Oil delivered by Validus under the Agreement and has failed to account for millions of dollars in revenues associated with the sale of Crude Oil owned by Validus. 33. In violation of the terms of the Agreement, CPE wrongfully blended Crude Oil owned by Validus with “indirect products,” including condensate. CPE’s violation of the Agreement has resulted in lost volumes of Crude Oil and inaccurate accounting of Crude Oil delivered to the Facility. 34. The Agreement requires that CPE keep information related to Validus’ oil and gas production and operations confidential. 35. CPE breached this obligation to the extent it shared confidential information related to Validus’ oil and gas production and operations with Coyote. Verified Petition 36. As a direct result of CPE’s breaches of the Agreement, Validus has been damaged by CPE in an amount to be proven at trial, but in any event an amount in excess of Six Million Dollars ($6,000,000.00). Second Cause of Action Conversion - CPE Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 37. CPE transferred, delivered or sold approximately 62,285 barrels of Crude Oil belonging to Validus while such Crude Oil was in CPE’s possession, custody and control. 38. CPE’s conduct amounts to conversion of Validus’ interest in the Crude Oil delivered to Facility. 39. As a direct result of CPE’s conduct, Validus has suffered damages in an amount in excess of Six Million Dollars ($6,000,000.00). Third Cause of Action Actual and/or Constructive Fraud - CPE Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 40. CPE made representations to Validus regarding the amount of Crude Oil belonging to Validus that CPE was holding at the Facility. 41. CPE knew that its representations to Validus were false at the time they were made. 42. Based upon CPE’s representations regarding the amount of Crude Oil belonging to Validus, Validus nominated those amounts of Crude Oil to be sold on the crude oil market. 43. However, because CPE was holding less Crude Oil than it had represented to Validus, Validus was unable to fulfil the amounts that it nominated, resulting in damage to Validus. 44. As a direct result of CPE's conduct, Validus has suffered damages in an amount in excess of Six Million Dollars ($6,000,000.00). Fourth Cause of Action Accounting - CPE Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 45. Validus is entitled to a complete accounting of all of CPE's books and records related to the Facility under the terms of the Agreement and common law. 46. Validus is entitled to an accounting of all transactions by or between CPE, Vivakor, Coyote and any others that are in any way related to the Facility or operations thereof. Fifth Cause of Action Unjust Enrichment – CPE and Vivakor Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 47. CPE improperly transferred, delivered or sold approximately 62,285 barrels of Crude Oil belonging to Validus while such Crude Oil was in CPE's possession, custody and control. 48. On information and belief, Vivakor received proceeds from the sale of approximately 62,285 barrels of Crude Oil belonging to Validus. 49. Equity and good conscience cannot allow CPE and/or Vivakor to retain the proceeds and benefits attributable to the Crude Oil belonging to Validus. 50. As result, CPE and/or Vivakor have been unjustly enriched in an amount in excess of Six Million Dollars ($6,000,000.00). Sixth Cause of Action Unjust Enrichment – Coyote Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 51. On information and belief, Coyote improperly received and subsequently sold some or all of the approximately 62,285 barrels of Crude Oil belonging to Validus that was in CPE’s possession, custody and control. 52. On information and belief, Coyote had knowledge that it was not entitled to receive and/or sell the Crude Oil belonging to Validus but did so anyways. 53. As a result, Coyote received Crude Oil and/or proceeds therefrom that equity and good conscience cannot allow Coyote to retain in an amount in excess of $75,000.00. Seventh Cause of Action Civil Conspiracy – CPE and Vivakor Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 54. On information and belief, CPE and Vivakor have acted in concert with the intent to convert over 62,285 barrels of Crude Oil belonging to Validus. 55. On information and belief, both CPE and Vivakor received a benefit from the conversion of over 62,285 barrels of Crude Oil belonging to Validus. 56. Validus has been damaged in an amount in excess of Six Million Dollars ($6,000,000.00) due to the acts of CPE and Vivakor. Eighth Cause of Action Civil Conspiracy – CPE and Vivakor Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 57. On information and belief, CPE and Vivakor have acted in concert with the intent to defraud Validus. 58. On information and belief, CPE, at the direction of Vivakor and for the benefit of Vivakor, made material misrepresentations to Validus regarding the amount of Crude Oil belonging to Validus that was at the Facility. 59. Based upon these representations, Validus nominated those amounts of Crude Oil to be sold on the crude oil market. 60. However, because CPE was holding less Crude Oil than it had represented to Validus, Validus was unable to fulfil the amounts that it nominated, resulting in damage to Validus. 61. Validus has been damaged in an amount in excess of Six Million Dollars ($6,000,000.00) due to the acts of CPE and Vivakor. Ninth Cause of Action Lien Foreclosure – CPE, Vivakor, Coyote & John Does 1-10 Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 62. Pursuant to 52 O.S. § 549.3(A), "[t]o secure the obligations of a first purchaser to pay the sales price, and to secure the obligation of any person to pay any proceeds, as defined in Section 549.2 of this title, for the acquisition of oil and gas rights, each interest owner is hereby granted an oil and gas lien to the extent of the interest owner's interest in oil and gas rights." 63. Pursuant to 52 O.S. § 549.3(C), "[a]n oil and gas lien exists until the interest owner or representative first entitled to receive the sales price or any proceeds, as defined in Section 549.2 of this title, for the acquisition of oil and gas rights, has received the sales price or any proceeds, as defined in Section 549.2 of this title, for the acquisition of oil and gas rights." 64. Validus has a lien pursuant to 52 O.S. § 549.3 on the 62,285 barrels of Crude Oil that were delivered to the Facility and improperly transferred, delivered or sold by CPE. 65. Validus’ lien on such Crude Oil exists until such time as Validus received the sales proceeds. 66. Additionally, Validus has a lien pursuant to 52 O.S. § 549.3 on the approximately 20,000 barrels of Plaintiff’s Crude Oil that allegedly remain at the Facility and under the control of CPE. 67. On information and belief, CPE and/or Vivakor received some or all of the proceeds from the sale of the approximately 62,285 barrels of Crude Oil belonging to Validus. Validus is entitled to a lien on any such proceeds. 68. On information and belief, Coyote improperly received and subsequently sold some or all of the approximately 62,285 barrels of Crude Oil belonging to Validus. Validus is entitled to a lien on any such proceeds. 69. On information and belief, John Does 1-10 improperly received and subsequently sold some or all of the approximately 62,285 barrels of Crude Oil belonging to Validus. Validus is entitled to a lien on any such proceeds. 70. As a result, Validus is entitled to foreclosure on its lien that exists on the proceeds from the sale of the 62,285 barrels of Crude Oil belonging to Validus and on the approximately 20,000 barrels of Plaintiff’s Crude Oil that allegedly remain at the Facility and under the control of CPE. Tenth Cause of Action Injunctive Relief/Expedited Appointment of Receiver Plaintiff adopts, restates, and realleges each and every allegation set forth hereinabove, and further states as follows: 71. Under 12 Okla. Stat. § 1551, Validus is entitled to have a receiver appointed to take charge of the Facility, including the operation thereof and control of all Crude Oil in storage at the Facility, which is believed to be in excess of at least approximately 20,000 barrels as of the date of this filing. 72. CPE’s insolvency coupled with CPE’s conversion of in excess of 62,285 barrels of Crude Oil from Validus is in clear violation of the terms of the Agreement. The Agreement specifically provides that in the event of a dispute between the parties, Validus is entitled “to seek a preliminary injunction, temporary restraining order, specific performance or other interim relief when deemed necessary by such Party to preserve the status quo or prevent irreparable injury.” 73. Because CPE is in breach of the Agreement and remains in possession of in excess of approximately 20,000 barrels of Validus’ Crude Oil that has not yet been converted or otherwise stolen by CPE, Validus is entitled to the immediate appointment of a receiver to take possession of, operate, manage, and control the Facility and all Crude Oil stored therein, and to handle all proceeds from CPE’s sale thereof. 74. Emergency appointment of a receiver should be immediately authorized because CPE is believed to be insolvent and has admittedly converted or delivered to third parties at least 62,285 barrels of Crude Oil owned by Validus and CPE remains in possession of more than approximately 20,000 barrels of Crude Oil belonging to Validus as of the filing of this action. The Crude Oil currently located at the Facility is in danger of being lost or converted by CPE in the absence of the appointment of a receiver. Validus possesses valid liens on its Crude Oil presently or formerly located at the Facility and any proceeds from the sale thereof. There is an immediate need to preserve and protect Validus’ lienholder rights to the Crude Oil at the Facility. 75. Upon information and belief, CPE is insolvent. The business is being mismanaged, and it has accrued debts and judgments against it that CPE cannot pay, placing the Facility and Validus’ Crude Oil located at the Facility in jeopardy. 76. By reason of the foregoing, it is apparent that Validus’ Crude Oil at the Facility is in danger of being lost, removed or sold to third parties. There is an immediate need to preserve and protect the Crude Oil at the Facility and to locate and recover the approximately 62,285 barrels of Crude Oil that were lost or sold by CPE to third parties. In the absence of a receiver, Validus will suffer irreparable harm in that its personal property interest and lienholder rights in the Crude Oil may be lost. 77. Accordingly, it is appropriate, and Validus requests, that this Court appoint a receiver to take control of the Facility, including assumption of operations thereof; to secure, safeguard, maintain and otherwise protect Validus’ Crude Oil and its rights to own and possess the same. The receiver should have full authority to collect all proceeds from any sale of Crude Oil or any other revenues or fees otherwise received by CPE for the benefit of Validus. 78. Validus has filed a separate Expedited Motion for Appointment of Receiver, all of which is incorporated herein by reference. WHEREFORE, Plaintiff prays this Court enter judgment for Plaintiff and against Defendants as follows: 1. An order finding that CPE breached the Agreement which resulted in damage to Validus in excess of Six Million Dollars ($6,000,000.00); 2. An order finding that CPE wrongfully converted at least 62,285 barrels of Crude Oil belonging to Validus while such Crude Oil was in CPE’s possession, custody, and control, which resulted in damage to Validus in excess of Six Million Dollars ($6,000,000.00); 3. An order finding that CPE defrauded Validus which resulted in damage to Validus in excess of Six Million Dollars ($6,000,000.00); 4. An order finding that Validus is entitled to an accounting of all transactions by or between CPE, Vivakor, Coyote and any others that are in any way related to the Facility or operations thereof; 5. An order finding that CPE and/or Vivakor were unjustly enriched by the improper sale and/or transfer of at least 62,285 barrels of Crude Oil belonging to Validus; 6. An order finding that Coyote was unjustly enriched by its receipt of Crude Oil and/or the proceeds from Crude Oil belonging to Validus; 7. An order finding that CPE and Vivakor acted in concert with the intent to convert over 62,285 barrels of Crude Oil belonging to Validus which resulted in damage to Validus in excess of Six Million Dollars ($6,000,000.00); 8. An order CPE and Vivakor acted in concert with the intent to defraud Validus which resulted in damage to Validus in excess of Six Million Dollars ($6,000,000.00); 9. An order finding that, pursuant to 52 O.S. § 549.3, Validus is entitled to foreclosure of the lien on the Crude Oil delivered to the Facility by Validus; 10. An order granting the Expedited Motion for Appointment of Receiver and an order appointing a receiver to take control of the Facility, including assumption of operations thereof; to secure, safeguard, maintain and otherwise protect Validus’ Crude Oil and its rights to own and possess the same; 11. An order awarding Validus its reasonable attorneys’ fees and costs; 12. For such other and further relief that this Court may deem just and appropriate. Dated: April 2, 2026 Respectfully submitted, By: Travis P. Brown, OBA #20636 Charles V. Knutter, OBA #32035 Scott R. Verplank, Jr., OBA #34041 MAHAFFEY & GORE, P.C. 300 N.E. 1st Street Oklahoma City, OK 73104 Telephone: (405) 236-0478 Facsimile: (405) 236-1840 [email protected] [email protected] [email protected] ATTORNEYS FOR PLAINTIFF, VALIDUS ENERGY II MIDCON LLC State of Oklahoma ) ) ss. County of Oklahoma ) VERIFICATION I, Kelly Ruminer, in my capacity as Manager - Crude Marketing of Validus Energy II Midcon LLC have examined the statements contained in the foregoing Verified Petition, and they are accurate to the best of my knowledge. Signature Printed Name: Kelly Ruminer Title: Manager - Crude Marketing Subscribed and sworn to before me this 15th day of April, 2026. Shelly L Wood Notary Public Commission No. 25010146 My commission expires: 08/26/2029