One of Alaska’s smallest producers filed for Chapter 11 bankruptcy protection March 8.
In court documents, Pacific Energy Resources Ltd. said the drop in oil prices toward the end of last year weakened the company’s cash flow, making it hard to pay off debt.
Pacific Energy owns producing oil and gas assets offshore California and in the Cook Inlet region of Alaska, and said its revenue stream is “largely dependent on the market price for the underlying crude oil produced, in addition to the level of production.”
After peaking around $145 a barrel last July, the delivered price of Alaska North Slope crude oil fell to nearly $25 a barrel before climbing back to between $40 and $50 a barrel.
Pacific Energy produced some 5,000 barrels of oil equivalent per day in Alaska in 2007.
Pacific Energy reported earned around $226.2 million in revenue in 2008.
Heavy debt load in AlaskaPacific Energy bought the Alaska assets of Forest Oil in August 2007 for $464 million.
To facilitate that deal, Pacific Energy took out two loans with the Goldman Sachs affiliate J. Aron and Co. and Silver Point Capital. As of March 8, the company said it had nearly $91 million outstanding on the first loan and around $322 million on the second.
The company’s Alaska assets include 100 percent interest in the Redoubt unit, the West Foreland field and the West McArthur River unit, fields on the west side of Cook Inlet.
Pacific Energy also owns a minority interest in Trading Bay and McArthur River, offshore fields operated by Chevron, and a 50 percent share of the Cook Inlet Pipeline.
Pacific Energy said it owes Chevron some $25.2 million in unpaid expenses.
Those liabilities are all listed as secured, using existing assets as collateral.
Pacific Energy still owes Forest nearly $32 million, the largest unsecured creditor listed in the filings. The remaining $9 million in liabilities is listed as “unsecured obligations.”
Altogether, Pacific Energy reported Alaska liabilities of some $480 million as of March 8, as well as more than $39 million in additional liabilities related to California prospects.
Last year, Pacific Energy sold two onshore prospects in California for $135 million to help pay down debt and raise money for future exploration activities in Alaska.
Pacific Energy is based in Long Beach, Calif., but maintains offices in Anchorage and Bakersfield, Calif. The company employs some 100 people across its operations.
Chapter 11 of the bankruptcy code is designed to rehabilitate the finances of a company through a court-approved reorganization plan that protects against creditor lawsuits.
Questions for other prospectsThe bankruptcy creates uncertainty for several other Alaska operations.
Through the 2007 purchase, Pacific Energy picked up undeveloped acreage in Cook Inlet, including eight leases in and around the offshore Corsair unit, south of Tyonek.
Earlier this year, Pacific Energy farmed out Corsair to Escopeta Oil, a Texas company looking to combine several offshore prospects in upper Cook Inlet into one large unit.
The state is expected to make a decision about the proposal sometime in mid-March.
Pacific Energy said it received approval of the deal from its lenders, which could keep the bankruptcy from impacting continued attempts to explore for oil and gas on the leases.
Through the 2007 sale, Pacific Energy also picked up a minority interest in the Three Mile Creek No. 1 and Three Mile Creek No. 2 gas wells operated by Aurora Gas LLC.