Occidental Petroleum Corp. (NYSE: OXY) is a stalking horse bidder for bankrupt Vanguard Natural Resources’ Sprayberry/ Wolfcamp horizontal trend assets in Glasscock County, Texas, according to regulatory and court filings.

An Oxy subsidiary agreed to purchase 3,048 net acres in the Midland Basin for $78.3 million—about $25,500 per acre. The leasehold holds an average net revenue interest of 81.7%.

However, the auction of the asset is entangled by pending litigation between Vanguard and Encana Corp. (NYSE: ECA) and Vanguard’s creditors.

In 2014, Encana and Vanguard agreed to develop the acreage. Encana has filed a motion with U.S. District Judge Marvin Isgur in which it does not object to the sale, but seeks to preserve its interests in property.

“Encana disputes the debtors’ ability to conduct a free and clear sale of the leases and asserts [Vanguard] cannot sell the leases to OXY free and clear of Encana’s interests” until the court has determined that Encana has no property rights in the leases.

Vanguard said it began exploring a potential sale of the assets in second-half 2017 and entered a purchase and sale agreement on March 20. The company said the Glasscock leasehold is noncore and not required for the company’s reorganization.

Oxy subsidiary Occidental Permian Ltd. is the primary joint leaseholder across the acreage block. Vanguard said it believes that much of the leasehold is subject to an existing operating agreement with Occidental Permian. Vanguard is operator under that agreement.

A committee of Vanguard’s unsecured creditors has raised several objections to the sale process.

As a stalking horse bidder, Oxy would be entitled to bid protections, including a 3% breakup fee, or $2,349,960, if it does not ultimately win the auction for the acreage. The creditors’ committee contends that a provision in the sale agreement between Vanguard and Oxy would result in payment of the fee to Oxy if the deal isn’t consummated within 60 days. The committee wants the fee payable only if a competing transaction is consummated.

Vanguard also wants to move ahead with bids due by May 1 and an auction the next day. The court would have to approve the bid in a hearing.

The committee wants the marketing period and auction timeline extended, saying the proposed schedule is “unusually and unnecessarily compressed.” It suggests the bid deadline be moved to May 15 and the auction to May 17.

The creditors also want to drop incremental bids to $1 million from $2 million to “encourage as many bidders as possible to participate in the auction,” according to a court filing.

The creditors also want sale proceeds to be placed in escrow until Vanguard’s payment of debts is settled at a later hearing.

Darren Barbee can be reached at dbarbee@hartenergy.com.