ALASKA (Dow Jones Daily Bankruptcy Review), May 28, 2009
Pacific Energy Resources Ltd. said it plans to sell its Alaska holdings, including its pipeline and valuable drilling rights in the Cook Inlet region, next week for $8.1 million in cash following a bankruptcy court-supervised auction.
The oil company said in bankruptcy court papers that Ammadon Ltd. and Catherwood Ltd., a pair of companies registered in the Virgin Islands, were the winning bidders for the Alaska assets following an auction held earlier this week. Leostar Investments Ltd. is guaranteeing the purchase price.
The state of Alaska is objecting to the sale to Ammadon and Catherwood because the firms aren't yet qualified as oil and gas operators under state law. Alaska says it must approve any firms that intend to explore and develop oil and gas fields on land leased from the state.
Representatives of Pacific Energy Resources couldn't be reached for comment.
The assets being sold don't include Pacific Energy's interests in leased oil and gas production facilities in Alaska operated by Union Oil Co. The company also had put those assets up for sale but canceled a planned auction after failing to receive any qualified bids.
Union Oil, a Chevron Corp. affiliate, operates the drilling facilities at Cook Inlet and charges Pacific Energy for expenses. The company says Pacific Energy owes it some $40 million and balked at any deal that didn't pay off its secured claim. Union also says Pacific Energy faces a share of decommissioning costs estimated to be at least $200 million.
Pacific Energy also is facing objections to the sale from creditors and several native Alaskan governments. The committee representing unsecured creditors in Pacific Energy's bankruptcy case says the sale benefits the company's senior lenders at its expense.
The lenders -- units of Goldman Sachs Group Inc. and hedge fund Silver Point Capital -- are pushing the company for a quick sale. It owes $361.1 million to the units of the two investment firms, who have been funding the case, according to court papers.
Two native Alaskan governmental authorities are concerned that the sale could leave them stuck with potential environmental cleanup costs if Pacific Energy is allowed to abandon certain wells and pipeline assets.
Production at the Alaska site, which is known as Trading Bay and is located about 100 miles southwest of Anchorage, was halted earlier this year following the eruption of nearby volcano Mount Redoubt.
Judge Kevin J. Carey, of the U.S. Bankruptcy Court in Wilmington, Del., has scheduled a hearing for Monday to consider approval of the sale. Pacific Energy also has put its drilling rights to oil fields off the Southern California coast on the auction block. The auction for the California assets is scheduled for next week.
Pacific Energy, formerly known as Shamrock Resources, filed for Chapter 11 bankruptcy protection in March, several weeks after defaulting on hundreds of millions of dollars in loans owed to its senior lenders.
The company, based in Long Beach, Calif., said its Chapter 11 filing was prompted by the drastic fall in the price of crude oil late last year. Oil prices fell below $35 a barrel last December -- from a high of $147 in July 2008 -- as demand fell among consumers and manufacturers swamped by the global economic downturn. Though crude prices have rebounded this year, it was too late to save Pacific Energy from bankruptcy court.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)
Copyright (c) 2009 Dow Jones & Company, Inc.
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