CALGARY – Canadian junior gas and oil producer Terra Energy Corp on Monday shut down production, ceased operations and announced the resignation of directors and officers, after its lender, Canadian Western Bank, demanded full repayment of its debt.
Terra, which was producing around 3,600 barrels of oil equivalent from the operations in western Alberta and north-eastern Bc, said that at current low oil prices the price of operating was a lot more than its revenue.
The company is the latest Canadian producer to fall victim to the prolonged slump in global crude prices, which have plunged by nearly two-thirds since June 2014.
Canadian Western Bank served notice on Friday demanding repayment entirely of the $15.9 million owed through the company by March 28.
“The company’s lender has declined to provide further financial support to Terra and there is no other way of financing open to the company at the moment,” Terra said in a statement on its website.
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Canadian Western Bank has not announced a receiver to sell Terra’s assets and declined to comment on the matter.
Since September 2015 Terra has sold off around $12 million in gas and oil assets to help reduce debt, however the amount was not enough to cover all its liabilities.
Terra also said the asset sales in Alberta were hampered by the company using a liability management rating of below one – the ratio that regulators use to evaluate whether a company’s revenues cover the cost of fully reclaiming all its oil wells.
Liability management ratings and oil well liabilities are becoming an ever more hot topic in Alberta, where lawyers have warned buyer concerns over reclamation costs associated with inactive wells are disrupting energy asset sales.
Terra shares were suspended from trading around the Toronto Stock market.
? Thomson Reuters 2016
