Aurora/Furie questionsAurora Well Services argues relationship should preclude bankruptcy payment ALAN BAILEY Petroleum News
In a recent twist in a federal court case in Alaska over the bankruptcy of Cook Inlet gas producer, Aurora Gas, Aurora Well Services has questioned the court’s approval of a payment of $87,000 by Aurora Gas to Furie Operating Alaska. Aurora Well Services, a separately owned and operated company, is a creditor of Aurora Gas.
Aurora Gas operates five small onshore gas fields on the west side of the Cook Inlet.
Money owed to Furie According to the request to the court by Aurora Gas for approval of the payment, the money is owed to Furie for natural gas that Furie has delivered to Aurora Gas in support of an Aurora Gas contract for the supply of gas to Tesoro Alaska, operator of an oil refinery at Nikiski on the Kenai Peninsula. The Furie gas came from the company’s Kitchen Lights gas field, offshore in Cook Inlet. Furie is also supplying gas to Homer Electric Association.
Judge Gary Spraker of the Bankruptcy Court for the District Court of Alaska had approved the payment to Furie but Aurora Well Services objected, saying that the payment was inappropriate because Kay Rieck, a German investor, owns Aurora Gas and also “either controls or has a great deal of interest in Furie.” The nature of these relationships and a potential conflict of interests “should be further explored and discussed” before the payment to Furie is approved, Aurora Well Services argued.
Judge Spraker has scheduled a hearing in September for reconsideration of the payment approval.
Involuntary bankruptcy The bankruptcy case began on May 3, when a group of three Aurora Gas debtors, including Aurora Well Services, filed a petition in the bankruptcy court against Aurora Gas for involuntary bankruptcy. Subsequently, in June, Aurora Gas filed for chapter 11 bankruptcy protection. In a declaration to the court filed in May, Edward Jones, president of Aurora Gas, told the court that his company had incurred a net loss in calendar year 2015 because of declining gas production and a well workover which had cost more than $1 million to execute but which had not resulted in the expected increase in gas production.
In testimony to the court requesting approval of the $87,000 payment to Furie, Jones said that his company’s main source of revenue is the sale of gas to Tesoro and that Aurora depends on obtaining some gas from Furie to continue to supply the required volumes of gas to the oil refiner. Under contractual terms with Furie, Furie will terminate the gas supplies unless Aurora Gas makes immediate payment of money owed, Jones testified. And without the revenue from the sale of gas to Tesoro, Aurora Gas would be forced to cease operations, Jones said.
Jones wrote in his testimony that Rieck owns Rieck Oil Inc., the company that owns Aurora Gas. Jones also wrote that he understands that Rieck has a minority interest in Furie.
But Aurora Well Services argued that the wording of an email between an Aurora Gas officer and Bruce Webb, senior vice president of Furie, about Furie’s gas supply to Aurora supports the concept that Rieck either controls Furie or has substantial influence over it. Moreover, it is not clear that the payment to Furie is actually necessary; nor is there any evidence that Tesoro would cancel its contract with Aurora Gas, should the gas producer fail to deliver the full amount of the gas specified in the Tesoro contract, Aurora Well Services told the court.
Company ownership According to public records maintained by the Alaska Department of Commerce, Community and Economic Development, Furie Operating Alaska is 100 percent owned by German company Deutsche Oel and Gas. Bruce Webb is listed as the agent for Furie in Alaska. And, according to information services company Bloomberg, Kay Rieck is chairman and CEO of Deutsch Oel and Gas. According to a bond prospectus published in March on the Deutsche Oel and Gas website, at that time Rieck held a significant interest in Deutsche Oel and Gas through a Dubai company called Alecto Ltd.
State records also confirm that Rieck Oil, a Delaware registered company, is 100 percent owner of Aurora Gas. Bruce Webb is the registered agent for Rieck Oil, with Kay Rieck listed as the company director, president and secretary.
Formed at the end of 1999, Aurora Gas acquired gas field properties in Cook Inlet, subsequently becoming an independent gas producer. Fairly early in the company’s history Kaiser Francis Oil Co. bought a large stake in the company, although in more recent years Kaiser had been trying to sell the Alaska company. A presentation on the Aurora Gas website says that Rieck Oil acquired Aurora Gas on Aug. 1, 2015.
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