Shareholders of Breitburn Energy Partners LP launched a last-ditch legal effort on Jan. 11 to prevent the bankrupt oil producer from wiping out their investment and sticking them with a huge tax bill at a time of surging crude prices.

At a hearing in U.S. Bankruptcy Court in New York, equity committee lawyer Vincent Indelicato said Breitburn's reorganization plan was based on an "indefensibly low" valuation. He also called it a "scheme" to give away assets to select creditors and reward management while hurting shareholders.

The stakes are especially high for Breitburn's shareholders because it is structured as a "MLP," which provides tax advantages when the company is profitable. But investors in such companies can lose more than 100% of their investment if the company does not make a profit.

Breitburn lawyer Ray Schrock urged U.S. Bankruptcy Court Judge Stuart Bernstein to approve the reorganization plan and bring the complex, 18-month bankruptcy to a close.

The plan, which envisions splitting Breitburn's oil and gas assets into two new companies, has the support of creditors holding more than $3 billion in claims. Two creditor groups will own the new companies.

In helping to craft the plan, Breitburn's investment banker Lazard Freres & Co. estimated the company's enterprise value, which includes debt and equity, at about $1.6 billion.

The equity committee estimates Breitburn is worth $3.8 billion, a valuation that would ensure some recovery on their investment and eliminate a tax charge.

Breitburn, however, has said the equity holders are about $1.5 billion shy of breakeven.

Breitburn filed for Chapter 11 bankruptcy protection in 2016 after oil prices had slumped to below $30 a barrel from more than $100 in 2014, triggering a wave of bankruptcies across the energy industry. Oil futures have since rebounded, trading above $60 per barrel in recent weeks to hit three-year highs.

New stock in energy-related companies, such as Peabody Energy Corp. and C&J Energy Services Inc. (NYSE: CJ) that exited bankruptcy last year, have rallied.

Under Breitburn's plan, unsecured creditors led by Elliott Management Corp. and WL Ross & Co. would own choice Permian Basin assets in Texas through a company formed through a $775 million rights offering.

Unsecured creditors with $793 million of debt would own a second company with oil reserves in California, the Rocky Mountains, the U.S. Midwest and Southeast. Retail bondholders would receive pennies on the dollar.