Canada's Terra Energy halts operations after bank demands payment

Mon Mar 21, 2016 3:01pm EDT
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By Nia Williams

CALGARY, Alberta, March 21 (Reuters) - Canadian junior oil and gas producer Terra Energy Corp on Monday shut down production, ceased operations and announced the resignation of directors and officers, after its lender, Canadian Western Bank, demanded full repayment of its debt.

Terra, which was producing around 3,600 barrels of oil equivalent from its operations in western Alberta and north-eastern British Columbia, said that at current low oil prices the cost of operating was more than its revenue.

The company is the latest Canadian producer to fall victim to the prolonged slump in global crude prices, which have plunged by nearly two-thirds since June 2014.

Canadian Western Bank served notice on Friday demanding repayment in full of the C$15.9 million ($12.18 million) owed by the company by March 28.

"The company's lender has declined to provide further financial support to Terra and there is no other means of financing available to the company at this time," Terra said in a statement on its website.

Canadian Western Bank has not announced a receiver to sell Terra's assets and declined to comment on the matter.

Since September 2015 Terra has sold off around C$12 billion in oil and gas assets to help pay down debt, but the amount was not enough to cover all its liabilities.

Terra also said the asset sales in Alberta were hampered by the company having a liability management rating of below one - the ratio that regulators use to assess whether a company's revenues cover the cost of fully reclaiming all its oil wells.   Continued...