Ivanhoe Energy seeks bankruptcy protection as oil prices weigh

Fri Feb 20, 2015 4:30pm EST
 
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CALGARY, Alberta Feb 20 (Reuters) - Ivanhoe Energy Inc said on Friday it will seek protection under Canada's Bankruptcy and Insolvency Act, as the company becomes the latest small oil-sands developer to struggle with oil prices that have fallen by more than half since June.

The company has been unable to make a C$2.1 million ($1.7 million) payment on a debenture issue and received a default notice earlier this week for the C$73.3 million issue. Ivanhoe was founded by famed mining investor Robert Friedland, who has lent the company $2.74 million since October.

Ivanhoe is the latest small oil sands developer struggling to survive low oil prices while operating in one of the world's highest-cost regions. It owns the Tamarack thermal oil sands property in northern Alberta and controls another heavy oil property in Ecuador.

Privately held Laricina Energy Ltd said on Friday it would suspend operations at its Germain heavy oil project and put expansions at the site estimated to contain almost 1 billion barrels of tar-like bitumen on hold.

Laricina, which said in October it would seek a buyer, is holding talks with the Canada Pension Plan Investment Board after it failed to meet covenants on a C$150 million note issue.

Under the terms of the Bankruptcy and Insolvency Act, Ivanhoe has up to six months of protection from creditors to restructure its operations. If the company, which had $61.3 million in long-term debt at the end of the third quarter, cannot restructure its operations or find new financing it will become bankrupt.

"The company continues to be actively engaged in discussions with various stakeholders to recapitalize the company," Ivanhoe said in a statement. "Strategic and financial alternatives under consideration are focused on relieving the financial burden of the company's current debt structure and obtaining additional financing necessary to fund ongoing operations."

Ivanhoe shares were halted on the Toronto Stock Exchange. They last traded on Thursday at 87 Canadian cents.

($1 = 1.2535 Canadian dollars) (Reporting by Scott Haggett; Editing by Lisa Shumaker)