Pacific Energy Resources announced that due to recent volcanic activity at Mt. Redoubt in Alaska, Cook Inlet Pipe Line Company's ("CIPL") Drift River Terminal has been shut down indefinitely. CIPL is owned 50% by a subsidiary of the Company and 50% by a subsidiary of Chevron Corporation, who also operates CIPL.
The State of Alaska created an emergency response team with a Unified Command composed of representatives of the Coast Guard, the State of Alaska and CIPL. On April 4, 2009, following another large eruption, the Drift River Terminal was completely evacuated and the Unified Command took the decision to not resume operations until the volcano has been declared dormant by the Alaska Volcano Observatory.
As a result, Chevron, as operator of the Trading Bay and McArthur River fields, has shut in jointly-owned production due to a lack of storage capacity. The Company owns a 46.8% interest in this production, which amounted in the fourth quarter of 2008 to 2,502 barrels of oil equivalent per day ("boe/d") for the Company's interest. Beginning in the fourth quarter of 2008, and prior to the Company's filing for chapter 11 bankruptcy protection on March 9, 2009, the Company's oil sales revenue from this production were being offset against monthly expenditures incurred by Chevron on the Company's behalf. The procedure for oil sales following the filing is before the bankruptcy court.
With respect to production operated by the Company, the Company has enough storage capacity for another 60 days approximately, based on current production rates. This production averaged 1,178 boe/d in the fourth quarter of 2008.
The Company remains in compliance with the terms of its debtor-in-possession financing.
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