Natural gas producer Trident Exploration ceased operations on April 30, the company announced.
Its 33 employees and 61 contractors have been terminated and approximately 4,700 wells are being transitioned to the care of the Alberta Energy Regulator.
The company said it had been working openly and collaboratively with its lenders and the AER since February, but was unable to secure AER support for a restructuring in a timely fashion.
The AER issued a a statement on Wednesday saying that “Trident Exploration Corp. has informed the Alberta Energy Regulator that its lender has withdrawn funding from the company.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 4,400 licensed sites, many of them active, without an operator.”
The regulator said that after being informed by Trident on April 29 of its intent to cease operations, it ordered the company “to properly manage its approximately 4,400 energy licenses by addressing end-of-life obligations through decommissioning its sites, posting financial security, or transferring the sites to responsible energy companies.
“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 regulator said.
“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.”
Trident said that its liquidity has been exhausted by the combination of extremely low natural gas prices and high surface lease and property tax payments (totaling C$0.72/GJ).
“These challenges reached a tipping point with persistent, unaddressed capacity constraints on TransCanada’s NGTL system leading to April AECO prices averaging C$0.81/GJ and summer prices currently averaging C$1.00/GJ. Further, and despite our extensive efforts, Alberta has no mechanism to allow a struggling energy company such as Trident to address its inflated surface lease and property tax obligations,” the company said in a statement.
Trident also blamed the recent Redwater decision by the Supreme Court in favour of the AER, which ruled that capping of orphan oil and gas wells and land reclamation should take precedence over creditors when a company goes bankrupt and leaves behind orphan wells.
“Ultimately, the recent Redwater decision, regulatory uncertainty and a lack of egress has created a treacherous environment for energy investors that dare to risk their capital in Canada,” Trident said.
The company’s estimates that its total abandonment and reclamation obligations are approximately $329 million. “Behind these obligations, we do not anticipate any recovery for shareholders and unsecured creditors. Likewise, any recovery for secured lenders is highly uncertain,” it said.
“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.
“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. In the face of this extended uncertainty, lenders and investors may flee Canada and further job losses will occur.”