CALGARY, Alberta (Reuters) - Canadian junior oil and gas producer Terra Energy Corp TT.TO 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.
Canadian Western Bank declined to comment on the matter.
Since September 2015, Terra has sold off around C$12 million 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.
Liability management ratings and oil well liabilities are becoming an increasingly hot topic in Alberta, where lawyers have warned buyer concerns over reclamation costs tied to inactive wells are disrupting energy asset sales.
(This version of the story corrects billion to million in ninth paragraph.)
Reporting by Nia Williams; Editing by Marguerita Choy