Kitchen unit auction?
After a successful year, Cook Inlet gas field foreclosure sale looms May 31
Furie Operating Alaska had been making good progress in the Kitchen Lights offshore gas field, having completed its planned 2018 drilling program and thus curing a 2017 default with the Alaska Department of Natural Resources’ Division of Oil and Gas, along with securing approval in December of its new plan of development for the Cook Inlet unit.
Then in early January, operator Furie ran into problems with hydrate plugs at the Kitchen Lights’ onshore processing facility and in the 15-mile subsea pipeline from the offshore production platform, which eventually slowed natural gas delivery to a trickle later that month and put Furie’s contract with utility Enstar Natural Gas in jeopardy. Gas output fell from 739,023 thousand cubic feet to a mere 1,886 mcf in February.
The next blow came in mid-April when a public notice of a foreclosure sale auction was posted in the Anchorage Daily News, followed by the same in Hart Energy’s Industry Voice.
The party behind the foreclosure was lender Energy Capital Partners, or EPC, which scheduled a May 10 auction for collateral held by borrowers, mentioning Deutsche Oel & Gas, Furie and Cornucopia Oil & Gas Co., the last two listed by the state of Alaska as part owners of Kitchen Lights. (Per its website, Deutsche owns Cornucopia and Furie, listing its primary asset in Alaska as the Kitchen Lights unit)
The May 10 auction was postponed until May 31, the auctioneer in the public notice, Ronald M. Caspert, later told Petroleum News in an email.
Pinsonnault leadIt was not the first-time lender ECP started foreclosure proceedings against owners of the Kitchen Lights unit. Something similar happened in 2018 when an auction was scheduled for April 13 of that year but was cancelled by ECP when a new agreement was presumably put together with the owners.
As part of that deal Furie’s leadership changed, with Scott Pinsonnault taking the helm as chief operating officer and Bruce Webb, who had been the company’s senior vice president, leaving the company.
According to state records, the ownership of the 83,394-acre unit falls out as follows on the leases and ostensibly for the other assets in the field such as the Julius R offshore production platform, the onshore production facility and subsea pipeline: Cornucopia Oil & Gas Company LLC 78.999%; Corsair Oil & Gas LLC, a subsidiary of Cornucopia 0.001%; A.L. Berry 7.875%; Danny S. Davis (see sidebar) 6.875%; Taylor Minerals LLC 5.25%; and, Furie Operating Alaska LLC 1%.
According to CorporationWiki, League City, Texas-based Corsair Oil & Gas’s members are Damon. R. Cade, manager, Trent Kososki, manager, Jeffrey A. Brodsky, independent manager, and Kay Rieck, member/manager. The company was formed in 2014 and currently shows as inactive in Texas.
Rieck is also chairman of Deutsche, per its website, with Webb listed as a board member since December.
Trent Kososki at ECPInterested bidders were asked to contact Trent Kososki at Energy Capital Partners Mezzanine Opportunities Fund A, LP, c/o Energy Capital Partners, 1000 Louisiana Street, Suite 5200, Houston, TX 77002, fax 713-496-3101, email [email protected]
A copy of the query should be sent to Jennifer M. Gray at Energy Capital Partners Mezzanine Opportunities Fund A, LP, c/o Energy Capital Partners, 12680 High Bluff Drive, Suite 400, San Diego, CA 92130, fax 858-703-4401, email [email protected]
Interested bidders can obtain access to a data room with information about the collateral and sale terms if they enter into a non-disclosure agreement, this year’s public notices said.
Bids subject to caveatsThe “secured party” referred to in the public notices is presumably the lender, ECP, since it sponsored the advertisements.
The auction, which will be held at the offices of Kirkland & Ellis LLP on Lexington Avenue in New York City (bidding by telephone allowed), is subject to these caveats:
* “The secured party reserves the right to bid, to become purchaser at the sale and, without deposit, to credit against the purchase price any or all sums due to it under the credit agreement and to adjourn, delay or terminate the sale at any time.”
* The collateral will be “sold as a block and not be broken down.”
* The Alaska Department of Natural Resources must “provide its approval with respect to a change of ownership of the borrowers. … Accordingly, the bidder shall use its best efforts to obtain the DNR approval within 30 days after the auction date.” If unsuccessful in getting DNR’s approval in that time period, “or otherwise confirmed in writing to the secured party that it will purchase the units without obtaining such DNR approval, by such date, the secured party reserves the right to cancel the sale to the bidder.”
* The bidder will be “required to represent that the collateral is being acquired for the purchaser’s own account and not with a view to the sale or distribution thereof and that the collateral will not be resold unless pursuant to an effective registration statement under the Securities Act of 1933 … and any applicable state securities laws or under a valid exemption from the registration requirements of the Act and such laws. The bidder will also be required to provide the secured party with an investment letter.”
Enstar contract still in effectBut not all recent news is bad.
“We have safely restored utility and communication between our onshore natural gas processing plant and the Julius platform over this past weekend,” Pinsonnault told Petroleum News in a March 19 email. He said Furie would spend the next few weeks making sure that the line was completely clear, functional and safe before restoring gas production from the field.
And while the number of producing wells fell from four in December, to three part-time in January, and one barely producing in February, by March one of the wells had been put back online and was producing about 25 percent as much gas as it had been in December (68,651 mcf).
At the time this story went to press in May, production was not yet available from the Alaska Oil and Gas Conservation Commission, and as of May 15, Pinsonnault had not replied to Petroleum News’ request for the status of natural gas production at Kitchen Lights.
But in a May 13 email, Lindsay Hobson, Enstar communications manager, said that although “Enstar is not receiving firm volumes from Furie at this time,” the contract with the independent is in effect.
“The parties,” she said, “are still in discussions regarding the future of the contract.”
Pinsonnault and ECP would not comment on the status of the foreclosure.