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Vol. 25, No.27 Week of July 05, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

HEX closes KLU sale

Closing on schedule with Ch. 11 reorg plan; AIDEA loan key to Alaska deal

Steve Sutherlin

Petroleum News

On June 30, Anchorage based HEX Cook Inlet LLC closed the deal 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 sale closed as scheduled in a third amended plan of reorganization filed June 7 in the U.S. Bankruptcy Court for the District of Delaware.

HEX will take over at 12:01 am July 1.

A state source has confirmed that the oil and gas leases of the Kitchen Lights unit offshore Cook Inlet will be in HEX’s name on July 1.

HEX Cook Inlet LLC is an Alaska limited liability company formed May 11, owned 80% by HEX LLC and 20% by Rogue Wave AK LLC.

HEX filed a notice required under treasury regulations June 30, describing its $5 million acquisition of all the issued and outstanding equity interests in the companies pursuant to a foreclosure under an amended credit agreement between the debtors and debtor’s lenders dated April 12, 2018.

In addition to the Kitchen Lights unit, the assets consist primarily of an offshore natural gas production platform, pipelines, and an onshore gas treatment plant.

AIDEA financing key to purchase

The purchase was made possible by an Alaska Industrial Development and Export Authority loan of $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.

“As an Alaskan with a lifetime of experience working in oil fields across our great state, I couldn’t be happier that Alaskans now have the opportunity to advance the development and operation of this great Cook Inlet asset,” said HEX LLC President and CEO John Hendrix. “HEX looks forward to bringing Kitchen Lights from base production to growth opportunities. The HEX team is grateful for AIDEA, and thanks them for their work and dedication to bringing us to this day.”

Raised in the south Kenai Peninsula town of Homer, Hendrix was general manager of Apache Corp. in Alaska, and he served on former Gov. Bill Walker’s cabinet as chief oil and gas advisor.

HEX is committed to hiring Alaskans, Hendrix told Petroleum News in a December interview.

“Anchorage hire; Alaska hire; peninsula focused,” he said.

For AIDEA, the project fits with its mission.

“AIDEA is very pleased that our support of HEX LLC has been instrumental in their acquisition of the Kitchen Lights offshore unit and infrastructure,” said AIDEA spokesman Karsten Rodvik. “This acquisition for an Alaska-owned operation will create new jobs in the Kenai Peninsula Borough, with more jobs expected as there is more development of the Kitchen Lights unit. Creating these kind of job opportunities is right in line with AIDEA’s mission and is especially important in these challenging COVID-19 times.”

HEX’s journey from its initial bid for the Kitchen Lights assets in late 2019, to ownership, was long and challenging.

HEX’s success in clinching an agreement was due to extensive negotiations to unravel complicated obstacles to resolution of the bankruptcy cases, Timothy Walsh of McDermott Will & Emery LLP, counsel to the debtors, told Petroleum News in an April 27 interview.

“The document was subject to significant negotiations among many constituents in the case including the debtor and all of its lenders,” Walsh said.

Walsh said the plan of reorganization reflects a meeting of the minds between all the major constituents in the case.

The debtor received other indications of interest from various parties, Walsh said.

“Unfortunately, none of the (other offers) entailed a settlement agreement with the debtors’ existing lenders,” he said.

In a memorandum filed June 8 supporting an order confirming the third amended plan, attorneys of the debtors argued that releases contained in the plan were vital to the successful reorganization of the companies.

Each of the debtors’ lenders is accepting less than otherwise entitled, it said.

The royalty and working interest owner parties agreed to reduce their interests in the oil and gas leases operated by the debtors and settle litigation claims, it said.

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