The restructuring and sales process with lenders failed due to issues it linked to January’s Supreme Court of Canada decision on Redwater Energy
CALGARY — Junior oil and gas company Trident Exploration Corp. says it is ceasing operations and will turn over care of its 4,700 wells to the Alberta Energy Regulator.
In a news release, the privately held Calgary-based company says its abandonment and reclamation obligations are estimated to be $329 million and it doesn’t expect any financial recovery for shareholders or unsecured creditors.
It says it terminated 33 employees and 61 contractors on Tuesday.
The company blames its demise on low natural gas prices and high lease and property tax bills, along with capacity constraints on TransCanada Corp.’s NGTL gas pipeline system.
It says a restructuring and sales process with its lenders failed due to issues it linked to January’s Supreme Court of Canada decision on insolvent Redwater Energy.
The high court ruled that energy companies must fulfil their environmental obligations before paying back creditors in the case of insolvency or bankruptcy, overturning lower court decisions that had favoured bankruptcy law over provincial environmental responsibilities.
“As many have speculated and we have now unfortunately proven, the Redwater decision has had the unintended consequence of intensifying Trident’s financial distress and accelerating unfunded abandoned well obligations,” the company stated Wednesday.
“Without regulatory collaboration and clarity, Trident is unable to address its near-term liquidity needs and has no financial ability to continue operating. We fear that many other companies may falter without clear, sound policy making post-Redwater.”
“In the face of this extended uncertainty, lenders and investors may flee Canada and further job losses will occur. Without access to financing, we expect that the Orphaned Well Association may grow exponentially,” the company said.
The Alberta Energy Regulator said it ordered the company on Monday to properly manage its approximately 4,400 energy licenses by addressing end-of-life obligations through decommissioning its sites, posting financial security, or transferring the sites to responsible energy companies.
It said Trident shut down operations, which are mainly natural gas, without responding to its order.
The regulator said it will ensure that the public and the environment are protected and will assess any high-risk sites to ensure there are no immediate risks.
“The AER will pursue all options to ensure that Trident’s infrastructure is transferred to responsible operators, safely decommissioned, or, as a last resort, transferred to the Orphan Well Association,” the regulator said late Wednesday in a release.
“Many of Trident’s wells were still operating and, once transferred to responsible operators, can still contribute to royalties, keep Albertans working, and deliver value to our economy.”
The AER said it will assess all options for possible enforcement.
The Canadian Press