|
Pacific Energy sale drama continues Bidders jockey for Cook Inlet oil and gas assets as objections pour in ahead of Nov. 3 hearing in US Bankruptcy Court in Delaware Wesley Loy For Petroleum News
An effort by Pacific Energy Resources Ltd. to recoup and then sell some of its abandoned Alaska oil and gas assets has ignited a competition for the properties, and drawn a flurry of objections.
The whole affair is headed for a showdown on Nov. 3 in U.S. Bankruptcy Court in Delaware, where Pacific Energy has been disposing of its holdings as well as its debts.
Pacific Energy in September walked away from the bulk of its assets around Alaska’s Cook Inlet after sale attempts failed.
On Oct. 14, the company filed a motion to retrieve a portion of the assets for purposes of a sale to a firm called Cook Inlet Energy LLC. The proposed sale price is $875,000 plus assumption of certain debts and other obligations.
At least three other contenders have emerged and are trying to claw away some or all of the properties Pacific Energy wants to deal to Cook Inlet Energy.
Meanwhile, lawyers for both the state and federal governments have filed objections to the proposed sale. So has Chevron, which formerly was Pacific Energy’s partner in certain Cook Inlet operations.
The objectors In papers filed on Oct. 27, lawyers for the State of Alaska object to the sale, noting Pacific Energy still owes the state property taxes, interest and penalties amounting to just over $250,000 in connection with several leases on the west side of Cook Inlet.
In addition, the state says it was forced to spend $204,822 to de-water and freeze protect abandoned Pacific Energy pipelines and other facilities to prevent cracking and possible spills in the coming winter and spring.
Lawyers for the U.S. Department of the Interior also filed objections. They argue Pacific Energy can’t recoup and then sell a West Foreland lease with two natural gas wells on Native land without the permission of the U.S. government. The federal lawyers cite concern about how Pacific Energy or its proposed property buyer will take care of more than $500,000 in royalty obligations and also post the required bond for well plugging and abandonment.
Chevron, through its Unocal subsidiary, also filed an objection. The company argues Pacific Energy shouldn’t be allowed to reverse the judge’s Sept. 11 abandonment order. Pacific Energy is “out of time” under bankruptcy rules to reopen the order, and is attempting to “re-plow old ground,” Chevron’s lawyers argue.
The Chevron lawyers also complain that Pacific Energy is trying to sell items it has no right to sell, such as an airstrip right of way at Chevron’s Trading Bay production facility. Pacific Energy previously owned a share in Trading Bay but abandoned its interest on Sept. 1.
Chevron further complains that Pacific Energy has yet to provide a clear and complete list, with proper legal descriptions, of exactly what properties it intends to sell.
“At a minimum, the Court should require a specific description of assets to be sold so parties-in-interest may understand their position and, if necessary, act to protect their rights,” Chevron’s lawyers argue.
Contenders include Miller Cook Inlet Energy is an Alaska limited liability company organized on Jan. 13 of this year and based in Anchorage. The owners are David M. Hall of Kenai and Walter J. Wilcox II of Anchorage.
Other contenders for the abandoned Pacific Energy properties have emerged in recent days.
One is a new company called Stellar Energy LLC, incorporated on Oct. 26 in Delaware. The principals behind the company are unknown.
On Oct. 27, lawyers for Stellar filed an objection seeking to block the asset sale to Cook Inlet Energy on grounds that Stellar is willing to offer the higher price of $1.25 million for the properties.
Stellar took a novel path to gain standing as a creditor in the case. It approached one of Pacific Energy’s unsecured creditors, Alaska Cab, which “assigned its claim in the amount of $452.54 to Stellar,” the company’s filing says.
The abandoned Pacific Energy properties have two other suitors.
Longtime Alaska oil and gas player Daniel Donkel has been battling through the Delaware bankruptcy court for some of the assets, and complains in an Oct. 27 filing that Cook Inlet Energy might have an unfair advantage because co-owner Hall is, or was, a manager for Pacific Energy.
Outside of court, Miller Petroleum Inc., doing business as Miller Energy Resources of Huntsville, Tenn., announced in an Oct. 20 press release it has “completed an agreement to purchase the assets of Cook Inlet Energy, LLC including $115 million in oil and natural gas reserves, 600,000 lease acres with potential additional reserves based upon $8.5 million in completed 3-D seismic geology, and numerous production facilities valued at almost $200 million for $875,000.”
“We hit it out of the park on this one,” said Miller’s chief executive, Scott M. Boruff.
In a filing with the U.S. Securities and Exchange Commission, Miller noted the deal is contingent on Cook Inlet Energy’s successful purchase of assets from the Pacific Energy bankruptcy estate.
Miller’s press release said the deal will close on Nov. 4, the day after the scheduled court hearing in Delaware where Bankruptcy Judge Kevin Carey could approve Pacific Energy’s motion to reclaim and then sell its abandoned Cook Inlet assets. Miller is an oil and gas exploration, production and drilling company active predominantly in the Tennessee portion of the Appalachian basin. Its stock price is quoted on the OTC Bulletin Board. The shares closed at 64 cents on Oct. 28.
Miller’s most recent annual report says the company had total revenue of $1.57 million and a loss from operations of $3.2 million for the fiscal year ended April 30. The company reported proved oil reserves of 53,443 barrels.
The sale properties The properties Pacific Energy wants to recoup and sell, all located along the west side of Cook Inlet, are believed to include state oil and gas leases, the West McArthur River oil field, and the West Foreland field with two producing natural gas wells.
Pacific Energy also appears to be proposing to sell a stake in the Three Mile Creek field, which Aurora Gas operates, plus some nonproducing, exploratory holdings that weren’t among assets abandoned in September.
One former Pacific Energy property that apparently won’t be included in the sale is the Osprey offshore platform, which sits over the Redoubt Shoal field.
Pacific Energy, a small oil and gas explorer based in Long Beach, Calif., filed for Chapter 11 bankruptcy reorganization on March 9, citing a steep decline in oil prices. Faced with mounting losses, the company moved to either sell or abandon its assets in Alaska as well as California.
Cook Inlet Region Inc., the Native regional corporation that acts as landlord for some of the abandoned Pacific Energy assets, filed papers in the Delaware court conditionally supporting the proposed sale to Cook Inlet Energy.
“Retaining the assets, and all related contracts, leases and easements, as a cohesive package enhances their value and avoids a chaotic situation,” lawyers for CIRI wrote.
| 