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Vol. 25, No.13 Week of March 29, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Furie/Kachemak asset sale craters; HEX, with AIDEA loan, in running

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Steve Sutherlin

Petroleum News

An acquisition by foreclosure agreement between Chapter 11 debtor Furie Operating Alaska LLC and acquirer Kachemak Exploration LLC for the sale of Furie’s Cook Inlet assets appears to have broken down.

Kachemak - a Delaware corporation recently formed by GFR Holdings of Fort Worth, Texas, and Melody Capital Partners L.P. - is seeking to acquire the Cook Inlet Kitchen Lights offshore unit, related infrastructure such as the Julius R offshore natural gas platform, together with an onshore processing facility and related pipelines.

According to a Law360 report, Furie told Judge Laurie Selber Silverstein that the deal collapsed last week, during a March 25 teleconference hearing in the U.S. Bankruptcy Court for the District of Delaware.

Timothy W. Walsh of McDermott Will & Emery LLP, counsel to Furie, said that the deal broke down in part over disagreements among the company’s creditors.

One creditor’s request for a side letter on what might happen in the context of a Chapter 7 may also have held up the deal.

“Those discussions on that side letter broke down and haven’t restarted,” said Abhilash M. Raval of Milbank LLP, counsel to Melody Capital Partners, LP and Kachemak Exploration LLC.

Ravel alluded to cost overruns as another snag in the sale.

“Given the cost overruns that were happening, it seemed prudent to terminate the transaction last week,” Raval said.

No details of the “liquidity issues” facing the business were given in court, but a source told Petroleum News that operating costs of the assets have “skyrocketed” under Furie’s interim management, Ankura Consulting Group LLC.

Kachemak and Melody are exploring alternative sale prospects with the debtors and affiliates of term lender Energy Capital Partners and ING Capital LLC, Walsh said.

The parties will attempt to complete an agreement in time for a scheduled May 4 confirmation hearing, Walsh said.

Alaska buyer still in the wings

On March 4 in Anchorage, the Alaska Industrial Development and Export Authority board unanimously approved a resolution authorizing an AIDEA loan of up to $7.5 million for Anchorage based HEX LLC to buy Furie’s Cook Inlet assets.

“The loan to HEX is in support of the company’s bid to acquire the Kitchen Lights offshore unit and related infrastructure out of bankruptcy from Furie Operating Alaska LLC,” AIDEA told Petroleum News in a March 6 email.

The sale would be structured as an acquisition of the limited liability companies (Cornucopia Oil & Gas Co. LLC and Corsair Oil & Gas LLC) that own the natural gas leases and the natural gas production infrastructure of the Kitchen Lights unit located in Cook Inlet, Alaska, AIDEA said in the resolution.



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