CORRECTED-UPDATE 1-Canada's Terra Energy halts operations after bank demands payment

Mon Mar 21, 2016 5:30pm EDT
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(Corrects to million from billion in ninth paragraph)

By Nia Williams

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

Terra, which was producing around 3,600 barrels of oil equivalent per day 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. A source with direct knowledge of the matter said no receiver had been appointed because Canadian Western Bank is concerned the receivership process would not be worth the cost to the bank.

"They are worried they will not find any (asset) purchasers because of economic and regulatory problems," said the source, who declined to be named because of client confidentiality.   Continued...