A Delaware bankruptcy judge has given preliminary approval for Pacific Energy Resources Ltd. to sell its minority stake in the Trading Bay unit in Alaska’s Cook Inlet.
For final approval, the buyer must meet a deadline of 5 p.m. Pacific time on Aug. 31 to show “satisfactory evidence of financial ability” to meet the obligations that come with the property, says the Aug. 18 order signed by U.S. Bankruptcy Judge Kevin Carey.
Pacific Energy, looking to liquidate its Alaska and California oil and gas properties as part of its Chapter 11 bankruptcy case, is proposing to sell its Trading Bay interest to Ocar Energy, a Delaware limited liability company with a business address in Toronto, Canada.
Little is known about Ocar, but Pacific Energy is based in Long Beach, Calif., and it’s shares were formerly traded on the Toronto Stock Exchange. Pacific Energy is based in Long Beach, Calif.
According to the 77-page purchase and sale agreement filed with the court on Aug. 12, Pacific Energy will sell its 47 percent working interest in the Chevron-operated Trading Bay property for $100.
However, the tiny sale price masks the true value of the deal. The buyer would assume some major financial obligations including at least $43.6 million that Chevron is owed for Pacific Energy’s share of production and maintenance expenses in Trading Bay. The buyer also would assume future plugging, decommissioning and abandonment obligations.
To establish “financial ability,” Ocar must show it has firm bank or other financing of at least $60 million in cash “immediately available at closing” to satisfy the purchase obligations, the purchase and sale agreement says.
Big court dateA hearing is scheduled for Sept. 1 in the Delaware bankruptcy court to consider Pacific Energy’s proposed asset sale. Trading Bay is believed to be the company’s most productive Alaska oil field property.
Pacific Energy filed for bankruptcy reorganization on March 9 citing the steep drop in oil prices toward the end of 2008.
The company has disclosed millions of dollars in losses on its Alaska holdings. Due to debt pressures and the likelihood of further losses, Pacific Energy has said it might simply abandon Cook Inlet assets it can’t sell.
Pacific Energy entered the Alaska scene in 2007, buying the assets of Forest Oil Corp. for $464 million.
In a May 15 financial report, Pacific Energy said its total production for the first quarter of this year was 6,514 barrels of oil equivalent per day, with 3,415 barrels produced in California and 3,099 barrels in Alaska.
Aside from Trading Bay, Pacific Energy is also trying to sell a second package of Cook Inlet assets to a different buyer.
The package includes assets that Pacific Energy itself operates: the West McArthur River field, the West Foreland field, and the Redoubt Shoal field with its Osprey offshore platform and Kustatan onshore facility. Also included are interests in the Three Mile Creek field, which Aurora Gas operates; some exploration properties; and a 50 percent stake in Cook Inlet Pipe Line Co.
Pacific Energy has said in court filings that it has a $7 million offer for these assets from New Alaska Energy.
According to Alaska Department of Commerce records, New Alaska Energy was organized as a limited liability company on April 1 of this year, initially taking the name Alaskan New Energy LLC. State records show that Bob Gross of Anchorage and Richard Stryken of Palmer each hold 50 percent of New Alaska Energy. (See related story in the Petroleum News’ Aug. 9 edition online) at http://www.petroleumnews.com/pnads/982119942.shtml