Calgary junior loses battle with debt
Producer’s assets to be liquidated
A 21-year-old junior Calgary oil and gas company has come to the end of the line, announcing a court-appointed receiver will liquidate its assets.
Trafina Energy Ltd., which is listed on the S&P/TSX Venture Exchange, said in a news release late Wednesday its directors had all resigned.
On Thursday, the exchange showed trading in its shares had been halted.
“Trafina . . . has been unable to develop a satisfactory plan to repay the indebtedness owing under its facility to its lender and, as a result, it is no longer able to maintain forbearance arrangements,” it stated in the release.
President and chief executive Kelly Ogle did not immediately return a phone call seeking comment.
According to its website, Trafina was formed in December 1991 and was primarily a natural gas producer. In October 2008, however, new directors led by chairman Bob Lamond (also chairman, president and CEO of Diaz Resources Ltd.) and new management led by Ogle took over. They decided to transform the company into a junior oil company.
In its first quarter 2012 news release, the company reported a net debt and working capital deficiency of about $3.37 million and a current maximum lending amount on its revolving facility of $3.5 million.
It noted a net loss of $790,000 on oil and gas sales of $1 million, down 30 percent from the same quarter of 2010 when it had a net loss of $940,000.
Analyst Gordon Currie of Salman Partners said it’s extremely rare for an oil and gas company to go into receivership because there are better options in the event of financial difficulty.
“You can sell assets, you could sell the whole company if you can find a buyer, you can recapitalize if you can find new equity from somewhere, public or private,” he said. “The last resort is CCAA (Company Creditors Arrangement Act).”
He added there are several other companies in Alberta in the same boat that are trying to sell assets to restore their relationships with their lenders.
Muchlarger compton petroleum Corp., for instance, announced last week it had obtained a third extension to June 22 to repay $30 million it has overdrawn on its credit facility of $110 million.
On May 16, Trafina announced it had struck a deal to sell its south Saskatchewan assets for $1.35 million to an unnamed party.
However, on June 7 it reported that deal had fallen through and, in the same news release, said its lender had demanded repayment of all debt, about $3.34 million, because it is “in breach of certain of its covenants under the facility as a result of the company’s current debt and liquidity problems associated with, among other things, the continuing depressed commodity price environment.”
Trafina was producing about 70 barrels perday from its heavy oil property in northeastern Alberta. It also had shallow gas assets near Wetaskiwin, southeast of Edmonton.