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Vol. 25, No.29 Week of July 19, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Mustang sale postponed

AIDEA asking for cash for North Slope oil field; new auction date pending

Kay Cashman

Petroleum News

The public auction of the Mustang oil and gas field that was scheduled to be held in the main entrance of the Alaska Court System Building in Barrow on July 31 has been postponed. A new date for the sale has not yet been set.

Lender Alaska Industrial Development and Export Authority is selling the property for cash to the highest bidder to satisfy all indebtedness, together with any interest and all necessary costs and expenses.

The sale date “was postponed as a matter of addressing logistics related to and handling of the case,” Karsten Rodvik, AIDEA’s external affairs officer, told Petroleum News July 15. “A new date has not yet been determined.”

Mustang, which is in the Southern Miluveach unit adjacent to the southwest edge of the Kuparuk River unit, is the first oil field on Alaska’s North Slope to have been taken from discovery to production by a small independent oil company - original operator and minority owner Brooks Range Petroleum Corp., or BRPC.

BRPC drilled the Mustang discovery well, North Tarn 1A, in January 2012. The field is thought to hold 21.2 million barrels of proven oil in place.

Hurt by last price crash

The company had originally planned to start the field using permanent 15,000 barrels per day production facilities, which would leave space for processing other nearby small fields, such as Placer. However, following the oil price crash in 2014, BRPC paused the project and came up with an alternative plan to install a modestly priced early production facility.

The idea was to start production at relatively low rates and, then, as production ramped up, use the resulting revenue to upgrade the production facilities to a larger scale. The company said the plan would still allow the handling of Placer oil.

Starting production in early November 2019, per the Alaska Oil and Gas Conservation Commission, Mustang produced 10,999 barrels of oil that month, averaging 478 barrels per day for the 23 days it was in production.

The field was offline for the entire month of December and has remained so until the process of putting it in cold shut-down commenced in early April.

But the Mustang owners were not able to make their payments, even after agreeing to a new, more lenient plan in January, and so AIDEA foreclosed.

Looking to cover debt

“The assets being sold are the real property as described in the Notice of Sale (first published on June 14), and the personal property as related to the Southern Miluveach unit,” Rodvik said.

As of April 29, the first of two notes on the Mustang assets, including principal, late fees, accrued interest and foreclosure fees, is listed as $70,290,445.91 in the legal notice. The second note shows a principal balance of $6,119,409.00, accrued interest of $608,252.52, zero late fees, and a per diem of $2,179.52. The balance will continue to accrue interest after April 29.

The substitute trustee is Trustee Services of Alaska.

Payment must be made at the time of sale in cash or by cashier's check. Or AIDEA, the original beneficiary, may enter a credit offset bid consisting of sums due it under the deeds of trust and notes.

The Mustang assets include a gravel pad (on ADL 390680 approximately 16 miles east of Nuiqsut) and road, pipelines, related facilities, and state of Alaska leases which means the sale is subject to approval by the Alaska Department of Natural Resources.

The bidder must use its “best efforts to obtain DNR approval within 30 days after the auction date,” the legal notice said.

If the bidder has not obtained that approval, or otherwise confirmed in writing to the trustee that it will purchase the property without obtaining DNR’s approval within 30 days of the auction, the trustee has the right to cancel the sale to the bidder.



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