Ursa Resources, one of the few companies to have drilled natural gas wells in recent years in western Colorado’s Piceance Basin, has filed for Chapter 11 bankruptcy.
Citing challenges ranging from low gas prices to regulatory uncertainty in Colorado to burdensome pipeline contracts inked during better times, the company is hoping to deal with its debts by finding a buyer, something it so far has been unable to do.
The company’s bankruptcy filings show it has $282.7 million in secured debt. Its largest unsecured debts include $5.3 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.
Ursa is privately owned and formed in 2012 to buy and operate properties in the Piceance that had been owned by Antero Resources.
It currently owns 41,000 net acres of oil and gas properties in the Piceance Basin, and has 579 gross operated wells now producing gas, natural gas liquids and oil, according to its court filings. While its most high-profile drilling had occurred around and in the Battlement Mesa residential community, it most recently had been drilling in rural Rio Blanco County, but isn’t currently drilling any wells.
Its bankruptcy filings indicate it has obtained financing allowing it to continue operating during bankruptcy proceedings, as it seeks to continue paying its 21 employees, along with royalty owners, and operating, utility and other ongoing expenses.
One of Ursa’s filings says an oil and gas price downturn in late 2014 “dealt a blow to the oil and gas industry and to the Company in particular.”
Ursa “was able to rally somewhat in 2016 and 2017,” according to the filing, by Jamie Chronister, chief restructuring officer for Ursa and its affiliates. But Chronister said in the filing that in 2017, depressed prices and “drilling disappointments, particularly with development from a well pad that did not meet expectations” led to renewed financial difficulties and a reduced borrowing base that kept it from drilling more wells.
“The passage of Senate Bill 181 in Colorado made it even more difficult for the Company to operate due to the increased restrictions on drilling and operating oil and gas properties, and the uncertainty caused by the bill also dampened the ability to raise capital,” the filing says.
Senate Bill 181, passed last year, overhauled how oil and gas development is regulated in the state, in part by putting a priority on protection of public health, safety, welfare, and the environment and wildlife. State agencies continue to work on adopting numerous rules to implement it.
Ursa worked through most of last year to try to refinance or restructure its debt, or sell its assets. According to Chronister’s filing, low gas prices, regulatory uncertainty and the financial burdens of two interstate pipeline contracts all have made a sale difficult to date.
The pipeline contracts, one involving the Ruby Pipeline and another involving Wyoming Interstate Co., were agreed to in 2013. Ursa says it doesn’t currently use any pipeline capacity under either agreement, but WIC and Ruby recently sued “based on alleged amounts due under these agreements.”
Ruby Pipeline is seeking about $13.7 million plus interest in a breach-of-contract suit. In its suit WIC is seeking about $362,000 in damages. Ursa didn’t return a message left with its Denver office Thursday requesting comment.
Dave Devanney, who until recently lived in Battlement Mesa, where he frequently voiced concerns related to Ursa’s drilling in that area, said it’s not a good time to be in the oil and gas industry and he was anticipating Ursa filing for bankruptcy.
“We only hope that the residents of Battlement Mesa are not further impacted by our neighbor Ursa Resources and their presence in our residential community,” he said.
Devanney now lives in Denver but remains active in oil and gas issues, recently having testified to the Colorado Oil and Gas Conservation Commission as it continues with rulemaking to implement Senate Bill 181.
Ursa noted in a filing that one natural gas drilling rig is currently being operated in the Piceance Basin, down from 100 at one time, due to depressed gas prices. That peak was reached in 2008. Now, Terra Energy Partners is the only company running a rig locally.