Energy

2 more bankruptcies hit Alaska energy sector, and more employees may be seeking protection too

Two oil and gas companies with operations in Alaska have recently filed for Chapter 11 bankruptcy protection, the latest in a string of such filings involving Alaska businesses.

But while low oil prices have crushed state revenues and led to widespread layoffs in the energy sector, bankruptcy attorneys said those problems aren't to blame for an increase in corporate bankruptcy filings.

Attorneys, however, said they are starting to see more people filing for personal bankruptcy protection as a result of the downturn in the petroleum industry, though they did not provide specific numbers.

Jennifer Holland, an attorney and owner of the Alaska Bankruptcy Center in Anchorage, said she's starting to hear from oilfield workers and others who have lost work or had paychecks reduced. They are suddenly unable to pay off credit cards and loans on cars, boats and houses.

"In the last two or three months I've seen a lot more people coming in for that," Holland said, including a machinist who lost a large contract tied to the slowdown.

As for the corporate filings, they include Aurora Gas, a longtime independent gas producer in Cook Inlet with offices in Anchorage and Texas.

The company says it lost $923,000 in 2015, due mainly to declining gas production and a failed effort to improve production at a Cook Inlet gas well that cost more than $1 million. The company employs 11 people, including nine in Alaska.

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In early May, three companies owed money by Aurora Gas filed an involuntary bankruptcy petition against the company, alleging it wasn't paying its debts.

Scott Pfoff helps oversee two of the entities that filed the petition – Aurora Well Services and Shirleyville Enterprises. The companies are owed $245,000 for providing lodging and the drilling rig for the failed well workover, Pfoff said.

Pfoff blamed management at Aurora Gas.

"Frustrated would be the mildest term," said Pfoff, describing his emotions.

"There are some cases where commodity prices and circumstances beyond people's control causes things like this to happen, but in this case it was not adequately capitalizing a business and starting a project without having the money to pay for it," he said.

Following the involuntary petition, Aurora Gas agreed to file for bankruptcy relief under Chapter 11. Its 20 largest unsecured claims amount to $1.5 million. Most of the businesses it owes money to are based in Alaska, according to court records filed Monday.

Ed Jones, president of Aurora Gas in Texas, declined to answer questions about the company's management.

"I'm not free to say too much," he said.

The well workover would have been eligible for the state's $600 million cash tax credit program that reimburses up to 65 percent of project costs in Cook Inlet. The state does not provide information on credits that have been provided to individual companies.

Chapter 11 bankruptcies

Twenty companies filed for Chapter 11 bankruptcy protection in Alaska during the yearlong period that ended in June.

Twelve of those filings were related to Tennessee-based Miller Energy. The company's subsidiaries included gas producer Cook Inlet Energy and North Slope oil producer Savant Alaska.

Miller Energy blamed low oil prices, but the company had other problems, including the Securities and Exchange Commission accusing it of accounting fraud, leading to a settlement and the company agreeing to pay $5 million over three years.

[Miller Energy files for bankruptcy]

In the previous yearlong period starting in June 2014, one company filed for bankruptcy protection under Chapter 11. Three companies filed in the year before that, court records show.

Erik LeRoy, a bankruptcy attorney representing Aurora Well Service and Shirleyville Enterprises, said he's also seeing more people seeking bankruptcy protection in Alaska because of layoffs in the energy sector.

"I'm seeing individuals suffering, but I'm not seeing the support companies yet," he said. "They seem to have protected themselves or are figuring out a way to solve their problems without bankruptcy."

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He said most of the corporate bankruptcy filings in the past year are not tied to low oil prices or problems in the economy in general. Instead, they appear to be based on individual circumstances unique to each corporation.

LeRoy said the filings in the past year may simply be related to timing.

"They might just have been building and for some reason they move through," he said. "It's like a run of fish. You wait and wait, and then they pump through in a day or two."

One victim was Johnson's Tire Service. It filed for protection under Chapter 11 last June, after a lawsuit resulted in the company owing more than $630,000 in claims and legal fees to the contractor that built its South Anchorage store.

[Johnson's Tire Service files for bankruptcy.]

David Bundy, an attorney representing Aurora Gas with a focus on corporate bankruptcies, said he hasn't seen an uptick in bankruptcies related to the problems in the energy sector. Not yet, anyway.

Linc Energy files

Also filing for relief under Chapter 11 is Australia-based Linc Energy, which in 2014 hoped to drill up to 70 wells at a site in the National Petroleum Reserve-Alaska accessible by a 100-mile ice road west of the Dalton Highway.

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[Linc Energy has high hopes at Umiat]

Linc highlighted the state's cash tax credit incentives in its 2014 annual report, noting it had received tens of millions of dollars in incentives, including $53 million in 2014.

Despite the help from those credits, Linc Energy's 11 subsidiaries, including Linc Alaska Resources, filed for relief under Chapter 11 in a U.S. Bankruptcy Court in Texas in late May.

In a recent report, the company cited "continued depressed oil prices" and losses exceeding $500 million in recent years. The company lists other challenges that include an inability to raise capital amid an ongoing legal action brought by the Queensland state government in Australia over allegations of environmental damage at an underground coal gasification plant there.

In Alaska, Linc Energy had also been working on a project that would turn underground coal into synthesized natural gas near Tyonek, across Cook Inlet from Anchorage. Division of Oil and Gas Director Corri Feige served as general manager for Linc Energy in Alaska for almost five years before she left the company in November 2014.

The company's offices in a Midtown Anchorage building were closed on Thursday, lights out and the door locked.

Linc Energy's 30 largest unsecured claims amount to almost $4 million, court records show.

Two companies with Alaska headquarters are listed among those claimants, including Travis/Peterson Environmental Consulting. The Anchorage-based company is owed $61,000, according to court records.

Co-owner Michael Travis said the money is a "big hit" for a small company.

In summer 2015, Travis/Peterson studied fish at the NPR-A site and the impact of ice roads on the tundra.

"We provided everything on time and on budget and we did them a good job, and then this happened," Travis said.

Travis said he feels "a little betrayed" by people in Linc's Houston's offices, who had cautioned him to be patient because the company had a slow payment system.

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Fearing that more companies may increasingly be in trouble because of the state's slowing economy, he said Travis/Peterson has ramped up efforts to collect payments from other companies.

"We're seeing other companies start slowing their payment, and we're very concerned about that," he said.

Officials representing Linc Energy did not return calls seeking comment.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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