Failed oilsands firm’s assets to be sold
Ivanhoe holdings open to bids on ‘ as- is- where- is’ basis until Aug. 28
Receiver KPMG officially opened bidding for the assets of bankrupt junior oilsands developer Ivanhoe Energy Inc. on Thursday, listing for sale its Tamarack oilsands leases, proprietary heavy oil upgrading technology and tax losses.
It said it would accept bids by qualified bidders for all or part of the assets, to be sold on an “as- iswhereis” basis, until Aug. 28.
The disposal is the latest in a long line of disappointing junior oilsands events that include the costly recapitalization of Connacher Oil and Gas Ltd., the receivership of Southern Pacific Resource Corp. and court protection for private Laricina Energy Ltd.
Oilsands analyst Michael Dunn of FirstEnergy Capital said he isn’t an expert on Ivanhoe’s leases but a model for their disposal could be the sale of SilverWillow Energy Corp. announced two weeks ago.
Cash- strapped SilverWillow — worth $ 90 million in stock market value in 2012 — announced it had agreed to sell itself for $ 1.7 million to another Calgary- based junior oilsands company, privately held Value Creation Inc., in a deal that must be approved by shareholders to proceed. ( Chairman and CEO Columba Yeung of Value Creation said Thursday he could not comment on whether he would bid for the Ivanhoe leases.)
In a presentation two years ago, Ivanhoe said it was “significantly undervalued” with a market capitalization of $ 115 million and an enterprise value of $ 126 million. Its shares have been halted from trading since February and are essentially worthless.
Both Ivanhoe and SilverWillow had proposed shallow thermal oilsands projects that were affected by an Alberta Energy Regulator review of caprock integrity — a total of five companies had project applications frozen in early 2014 over concerns that underground pressure could lead to blowouts at surface and other undesirable consequences.
In its annual report this week, the AER said it has completed “thorough technical work to ensure that risks are well understood and that outcomes will be protective and effective” and promised draft requirements from the review will be ready for stakeholder consultation later this year.
Ivanhoe Energy was petitioned into bankruptcy by Robert Friedland, a Vancouver mining company financier, who was the company’s co- founder and primary shareholder as well as its primary secured lender. He did not respond to a Herald request for comment on Thursday.
In a report on its website, KPMG revealed that Friedland had advanced a total of $ 6.4 million US to the company, $ 5.1 million by way of loans in 2014 and $ 1.1 million through an interim financing promissory note during its failed initial application to restructure under the Bankruptcy and Insolvency Act.
“As a result of the sharp reduction in oil prices in late 2014, Ivanhoe was unable to raise additional capital to fund ongoing costs and as a result did not make the bond interest payment of $ 2.1 million due on Dec. 20, 2014, in respect of the $ 73.3 million convertible debentures,” the KPMG report notes.
“On Feb. 9, 2015, the trustee for the bondholders issued a demand for payment for the overdue interest instalment.”
Ivanhoe’s assets include two oilsands leases covering nearly 3,000 net hectares in northern Alberta and containing proved plus probable reserves of 172 million barrels of bitumen. It had proposed building a $ 1.37- billion, 20,000- barrelperday thermal project there, planning like many juniors to win project approval and then seek deep- pocketed partners to help build it.
The leases were purchased for $ 75 million in 2008 from Calgarybased Talisman Energy Inc., with an additional $ 15 million to be paid when certain areas were developed. The receiver’s report lists Talisman ( recently sold to Spanish energy giant Repsol S. A. for $ 13 billion US) as a secured creditor owed $ 15 million.
KPMG is also trying to sell Ivanhoe’s HTL or heavy- to- light patented process that converts heavy oil to lighter synthetic crude oil that can be transported by pipeline without the need for diluent. The assets include a licence from Ensyn Corp. and a feed testing facility in San Antonio, Texas.
Even the company’s operating losses are for sale. KPMG estimates Ivanhoe could have as much as $ 408 million Cdn and $ 78 million US in accumulated losses or tax pools a buyer could use to offset future income tax obligations.
The report notes Ivanhoe has 175 unsecured creditors owed $ 4.1 million, consisting of professional services firms, ex- employees and trade suppliers. Its debenture holders, owed $ 76 million, are also counted as unsecured creditors.