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.
READ MORE: Abandoned well ruling from Supreme Court ‘credit negative’ for energy firms, says Moody’s
Watch below: (From Jan. 31, 2019) Canada’s high court has ruled the trustee for a bankrupt Alberta energy company can’t walk away from unprofitable wells on farmland without cleaning them up. Tomasia DaSilva has reaction from landowners, energy industry groups and the Alberta government.
_848x480_1435568707728.jpg?w=1040&quality=70&strip=all)
It says it terminated 33 employees and 61 contractors on Tuesday.
In the release, 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.
READ MORE: PSAC cuts oil and gas drilling forecast again as slowdown deepens
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.
“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.”
On Wednesday evening, the AER issued a statement about Trident ceasing operations. You can read the statement in its entirety below.
Trident Exploration Corp. has informed the Alberta Energy Regulator (AER) that its lender has withdrawn funding from the company.
Because of this, Trident does not have the funds to operate its infrastructure or enter into creditor protection. As a result, they have decided to walk away, leaving more than 4400 licensed sites, many of them active, without an operator.
The AER has been working with Trident for several weeks to address concerns about its ability to continue operating to ensure that their assets end up in the hands of responsible operators and that end-of-life obligations are addressed to the greatest extent possible.
The AER’s mandate is to protect public safety and the environment while ensuring responsible energy development. Addressing end-of-life obligations is essential to responsible energy development. The AER has a responsibility to uphold the Supreme Court of Canada’s ruling that financial matters do not have priority over environmental responsibilities.
On April 29, after Trident informed us that they were going to cease operations, the AER ordered the company to properly manage its approximately 4,400 energy licences by addressing end-of-life obligations through decommissioning its sites, posting financial security, or transferring the sites to responsible energy companies.
The majority of Trident’s operations are in natural gas, which has experienced weak prices for several years. While we are aware of the difficult market conditions Trident has endured, we also have a responsibility to ensure that safety and environmental requirements are being met.
On April 30, the AER was informed that, without responding to our order or addressing their regulatory obligations, the directors ceased operations, terminated employees and contractors, and then resigned.
The AER will ensure that the public and the environment are protected and will assess any high-risk sites to ensure there are no immediate risks.
If members of the public have any safety concerns with any Trident site, they are asked to contact the AER’s 24-hour complaint and emergency response line at 1-800-222-6514.
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.
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 will assess all options for possible enforcement.
For more information on the obligations of licensees when in insolvency or ceasing operations, click here.
–With files from Global News’ Phil Heidenreich
Comments