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Pacific Energy gets some breathing room Company gets forbearance until February on several defaulted loans; considering options for possible sale, merger or refinancing Eric Lidji Petroleum News
Pacific Energy has been given a brief reprieve on its loans, the company said on Dec. 29.
The California-based independent oil company with significant acreage in Alaska said its lenders have agreed not to act on several defaulted loans until at least Feb. 2, 2009.
Pacific Energy hopes to use the time to figure out its financial future. The company said it spent six months negotiating with lenders to get “a longer term solution for its credit facilities and to fund the necessary capital expenditures to execute its business plan.”
For the past month, the company said it “has been reviewing a number of strategic and financial options” and recently hired a “restructuring advisor” to help it sort out some alternatives such as “equity, mezzanine and debt financing, industry and financial partnerships, merger and a sale of all or substantially all of the company or its assets.”
Pacific Energy’s debt comes mostly from loans with affiliates of Goldman Sachs and Silver Point Finance. Pacific Energy originally announced the loans in June 2007.
The company amended those loans in January 2008 to extend deadlines for repayment.
In third-quarter filings, Pacific Energy said it still owed some $431 million on those loans, including nearly $411 million from two loans taken out to pay for the acquisition of Forest Oil’s Alaska assets in August 2007 for about $430 million in cash and stock.
As of Sept. 30, Pacific Energy said it was “not in compliance” with the terms of those loans, and its “ability to continue operations as planned, including capital spending on the schedule desired, is dependent upon a successful amendment of these agreements.”
State worried about funds Statements like that worried state oil and gas officials, who have been battling and negotiating with Pacific Energy over efforts to explore a prospect in the Cook Inlet basin.
The state is concerned Pacific Energy doesn’t have enough funding to advance the project, according to Kevin Banks, acting director of the Division of Oil and Gas.
At a legislative hearing on Dec. 1, Banks said Pacific Energy was “on the verge of a bankruptcy” and “out of balance as far as being able to carry the kind of debt that they now have.” He also noted that while Pacific Energy earns some revenue from producing fields in Alaska and California, the company is essentially “externally financed.”
Pacific Energy sold two land holdings this summer for a combined $135 million. The company used around $45 million of that to improve its debt to revenue ratio this year.
Pacific Energy is one of several companies talking with the state about combining several prospects into one large unit in the Cook Inlet in an attempt to keep leases from expiring.
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