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Hex advances on Furie asset purchase
Loan document plan supplement filed, as June-end closing nears; closing under new ownership structure as HEX Cook Inlet LLC Steve Sutherlin Petroleum News
Anchorage based Hex LLC is moving forward - under a new name - with its planned purchase to acquire the assets and existing equity interests of Chapter 11 debtor Furie Operating Alaska LLC and related debtor companies - Cornucopia Oil & Gas Company LLC and Corsair Oil & Gas LLC.
The debtors filed a plan supplement on May 29 in the U.S. Bankruptcy Court for the District of Delaware, to the May 6 second amended joint plan of reorganization for the debtors.
The supplement - subject to the approval of all parties - includes loan documents for Hex’s proposed Alaska Industrial Development and Export Authority purchase financing, a debtor in possession replacement loan agreement, a new tax credit loan agreement, and other documents.
The plan supplement documents have not yet been approved by the bankruptcy court but will become part of the plan of reorganization once the plan is approved.
The sale, which is scheduled to close at the end of June, will take place as a private sale foreclosure.
Hex has elected to complete the foreclosure sale through HEX Cook Inlet LLC, an Alaska limited liability company formed May 11, owned 80% by Hex and 20% by Rogue Wave AK LLC.
AIDEA loan The initial AIDEA loan will be $7.5 million, with an option to borrow not more than $5 million as part of the AIDEA loan secured by a first priority lien in the collateral.
Hex must demonstrate to AIDEA that it has received capital contributions in an amount equal to at least $2.5 million, and Hex will pay an origination fee of 1% at closing.
The loan terms include an economic development clause; once Hex has achieved production of gas from the Sterling formation at sustained rates, it will “negotiate rates at a meaningful discount level to be reasonably determined between the parties to the agreement for interruptible gas volumes produced by the borrowers to underserved or constrained gas utilities in Alaska.”
Payments are to be made quarterly based on a four-year amortization, subject to certain formulas including milestones of gas production from the field.
The loan is subject to a debt coverage ratio of 1.50:1.00 and a minimum reserve coverage ratio of 1.15:1.00 based on proved developed producing reserves - initially, Beluga A1-A3 wells, as adjusted to include Sterling wells, when producing.
On the effective date of the loan, on first day of each calendar quarter, the borrowers will make a mandatory prepayment of the loan, with accrued interest, in an amount equal to 100% of the borrowers’ excess cash. The payment will be made by cash sweep from the proceeds account. Beginning on the first day of the calendar quarter after borrowers debottleneck the Beluga A4 well, and achieve a sustained gas production (as measured over a period of 30 days) exceeding 14.5 million standard cubic feet per day, and continuing on the first day of each calendar quarter, the borrowers will make a mandatory prepayment of the loan, with accrued interest, in an amount equal to 25% of the borrowers’ excess cash.
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