Assuming a bankruptcy court judge approves the deal, Terra Energy Partners will pay fellow Piceance Basin natural gas producer Ursa Resources $60 million for its assets, according to a court filing.
Terra was the successful bidder in an auction Ursa conducted last week, and Ursa will seek court approval of the sale at a hearing Thursday.
Proceeds of the sale will be distributed during the bankruptcy process, but are far less than what Ursa owes creditors. Ursa’s obligations include $282.7 million in secured debt, with unsecured debt including more than $5 million owed to the Garfield County Treasurer’s Office, $5 million owed to the interstate Ruby Pipeline and $718,000 owed to the Rio Blanco County Treasurer’s Office, according to its initial bankruptcy filings around the start of September.
Ursa owns 41,000 net acres of oil and gas properties in the Piceance Basin and has 579 operating wells producing gas, natural gas liquids and oil.
Terra Energy Partners is a leading Piceance Basin gas producer.
A growing number of U.S. oil and gas producers have gone bankrupt as low prices have left them unable to keep up on debt payments. Ursa also faces suits over alleged financial obligations for pipeline contracts and has cited the challenge of increased regulatory restrictions in Colorado related to the passage of the Senate Bill 181 oil and gas law, saying uncertainty over the bill made it harder to raise capital.
Ursa had 21 employees as of its bankruptcy filing. The proposed sale to Terra includes terms allowing for Terra to interview and potentially hire Ursa workers.
George Barton is an attorney representing some mineral royalty owners involved in the bankruptcy case. He said he’s not aware of any opposition to the proposed sale.
“I’m sure the sale will go through to TEP. I would have no doubt about that, I’ll put it that way,” he said.
Barton is representing royalty owners in an ongoing lawsuit involving a disagreement with Ursa over how much it should be paying them. He said his firm is arguing in bankruptcy court that they shouldn’t be treated as unsecured creditors when it comes to the amount of money they’re claiming in their lawsuit.
When Ursa gets paid for gas sales it holds a portion of proceeds in trust because that portion belongs to royalty owners, and paying royalty owners should be prioritized over all other claims during bankruptcy proceedings, Barton said. He said Ursa can’t be granted relief from that obligation and the royalty money owed shouldn’t be considered part of its bankruptcy estate.
“That’s something that’s going to be taken up in the bankruptcy proceeding on behalf of the royalty owners,” Barton said.