Delta Petroleum sells gas holdings to focus on Vega drilling
Financially troubled Delta Petroleum Corp. plans to concentrate on its natural gas holdings in Mesa County after selling numerous other assets, including another interest in western Colorado’s Piceance Basin.
Denver-based Delta has closed on the $130 million sale to Wapiti Oil & Gas LLC. The sale follows a failed effort by Delta to sell a share in its Vega Area assets outside Collbran to another company to help fund further drilling there.
The Wapiti sale includes Delta’s 31 percent working interest in 6,300 acres in the Garden Gulch area near Parachute. Berry Petroleum is in charge of drilling operations for that acreage.
The sale also includes half of Delta’s working interest in its DJ Basin fields and in several Texas fields, its stake in Piper Petroleum and certain other holdings.
Delta is using the money from the sale to cover transaction costs and pay down debt.
Carl Lakey, the company’s chief executive officer, said in a news release, “The successful closing of this non-core asset sale allows us to significantly reduce our bank debt and to concentrate our capital and personnel on our operated Vega asset. With a stronger liquidity position and a more focused approach on our operations, we can now work towards increasing production and proved reserves in the Piceance Basin.”
Delta said Monday it lost $162 million for the first half of this year, which includes a $96 million charge related mostly to discontinued operations of assets held for sale during the second quarter.
Delta lost $328 million in 2009 and $456 million the previous year.
In May, it wrote in a financial filing that its ongoing losses, maturing debt and lack of capital “raise substantial doubt about the company’s ability to continue as a going concern.” However, it says that as of June 30 it was in compliance with its financial ratio, capital expenditure and accounts payable covenants under its credit agreement.
In March, Delta announced its intent to sell a 37.5 percent interest in its Vega assets to Opon International LLC for $400 million, with $225 million of that expected to be used for development of the Vega assets over three years. However, the transaction fell through after Opon wasn’t able to obtain financing for it.
Delta’s Vega leaseholds include about 22,150 net acres, and it ended 2009 with 188 producing wells there. It suspended drilling there last year and says it has more than 2,000 wells remaining to be drilled there.
However, its line of credit was reduced from $145 million in April to $35 million in July, and its credit agreement limits it to spending up to $28 million in capital expenditures for the second half of the year. For the rest of the year it plans to do completions on its 15 remaining drilled but uncompleted wells in the Vega area.
In July, Delta announced that President and Chief Operating Officer John Wallace agreed to resign as an officer and director, and that Lakey, senior vice president of operations, had been named CEO.