Our summaries of recent Canadian insolvency filings.
September 27, 2021
Alcan Fluid Disposal Ltd., a Prince George, British Columbia-based oil and gas company which operated two wells for the purpose of wastewater disposal, filed an assignment in bankruptcy on September 27, listing over $2 million in debts, including approximately $130,000 for estimated reclamation costs. The company has not been an operating entity for approximately 10 years before the filing. MNP is the bankruptcy trustee.
August 13, 2021
Abbey Resources Corp., a Calgary, Alberta-based owner and operator of over 2,000 shallow gas wells in Swift Current, Saskatchewan, obtained protection under the CCAA on August 13, listing approximately $15.3 million in liabilities, including $5.2 million for municipal taxes, $6.5 million owed to surface rights holders, and $1.6 million owed under leases with mineral rights holders. Since the company acquired the wells via three transactions in 2016 and 2017, the price the company has been able to sell its production from those wells has not been sufficient to pay its debts. While the company has been able to cover its day-to-day operating costs, it cannot consistently pay land taxes to the municipalities and one First Nation where the wells are located. Opponents to the CCAA application alleged, among other things, that the company was not acting in good faith. In particular, they suggested that the company knew from the outset that the operations it established in the three asset acquisitions would not generate sufficient cash flow to pay its debts as they become due. Moreover, the opponents stated that they have lost confidence in the company's management. Despite strong opposition by the regulator, the Saskatchewan Minister of Energy (the "Minister"), the court also approved the inclusion of a provision in the initial order staying administrative action by the Minister for the company's failure to pay certain funds. MNP was appointed monitor. Counsel is DLA Piper for the company, McDougall Gauley for the monitor, Robertson Stromberg for the Minister, Miller Thomson for the Rural Municipality of Lacadena No. 28, Kanuka Thuringer for the Rural Municipality of Miry Creek No. 229 and MLT Aikins for Carry the Kettle Nakoda Nation Band No. 76.
August 3, 2021
Stratford Petroleum Inc., a Stratford, Ontario-based company that owns and operates an Ultramar gas station and related convenience store in Stratford, was placed in receivership on July 9 on application by BMO, owed over $2.5 million. BMO, which provided a real estate financing loan to the company, began to have concerns in January 2021 when the company missed a payment. The company's financial results were also a concern with gas volumes down 60% from projections and convenience store sales down 70%. After BMO learned that the gas station was under a conditional agreement of purchase and sale ("SPA"), BMO demanded repayment for all amounts outstanding from the company. However, the SPA did not close on the expected date and the company's principals advised BMO that the sale process was "stuck" because the company's gas supplier refused to waive a right of first refusal in connection with the business. At present, there is no closing date and the loan has been in default for six months. Rosen Goldberg was appointed receiver. Chaitons is counsel to BMO.
July 13, 2021
Kate Energy Holdings Inc., a Calgary, Alberta-based power producer, was placed in receivership on July 13 on application by Campus Energy Partners LP ("Campus"), owed approximately $10.8 million. In 2019, the company and Campus entered into 1) an LNG Supply Agreement whereby the company agreed to purchase liquified natural gas from Campus, and 2) an equipment lease agreement whereby the company agreed to lease a trailer from Campus. However, the company failed to comply with the express terms of the supply agreement and equipment lease agreement when it did not make payments to Campus when due. Hudson & Company (GRIP) Insolvency Trustees was appointed receiver. Counsel is Torys for Campus and Dentons for the receiver.
Clearbeach Resources Inc. and Forbes Resource Corp. (the "Companies"), a London, Ontario-based business that owns and operates 402 oil and natural gas wells in Southwestern Ontario, obtained protection under the CCAA on May 20. In 2020, facing pressure from their senior lender, Pace Savings & Credit Union Limited ("Pace"), the Companies commenced NOI proceedings under the BIA to address the indebtedness to Pace as well as other operational issues, including environmental obligations in respect of various wells. The NOI proceedings were extended multiple times. The Companies were able to negotiate a settlement with Pace to continue their NOI proceedings under the CCAA. During these proceedings, the Companies will consult with the Ministry to address environmental stewardship obligations and consider the viability of presenting a plan to their creditors and stakeholders. MNP was appointed monitor. Counsel is Bennett Jones for the Companies, Aird & Berlis for Pace, and Loopstra Nixon for the monitor.
May 19, 2021
Salt Bush Energy Ltd., a Calgary, Alberta-based resource company engaged in the production and development of oil and natural gas assets primarily located in the Wizard Lake Oilfield, obtained protection under the CCAA on May 19. In January 2021, the company filed an NOI, listing approximately $19.9 million in liabilities, including $16.5 million to Whitebark Energy Ltd. ("Whitebark"). Deloitte, which consented to act as proposal trustee, commenced a stalking horse marketing and sales process for the company's assets (the "SISP"). However, since no qualified bids were received before the bid deadline, the SISP was automatically terminated and the company filed an application seeking the approval of an Asset Purchase Agreement between the company and Ironbark Energy Ltd. (the "Stalking Horse APA"). The Stalking Horse APA will be effected pursuant to a Reverse Vesting Order and the proposal proceedings commenced by the company under the BIA will be continued under the CCAA. Deloitte was appointed monitor. Counsel is McCarthy Tétrault for the company and Dentons for the monitor.
April 23, 2021
Sanling Energy Ltd., an oil and gas company with licences to operate 2,279 wells, 2,170 pipelines and 267 other facilities across Alberta, and 94 well permits, 94 facility permits and 53 pipeline permits for infrastructure located in British Columbia, was placed in receivership on April 23, 2021, on application by the Orphan Well Association ("OWA") and the British Columbia Oil and Gas Commission ("BC OGC"). The AER and the BC OGC issued several escalating orders to the company regarding its non-compliance with reclamation obligations, abandonment orders and a number of regulatory infractions. On February 1, 2021, the BC OGC suspended the company's permits, and on March 4, 2021, the AER ordered that the company shut in all of its assets subject to AER licences. As of April 15, 2021, the company has estimated deemed liabilities of approximately 67.6 million owing to the b and approximately 2.8 million owing to the BC OGC. PwC was appointed receiver. Counsel is MLT Aikins for the OWA and the BC OGC.
March 11, 2021
GS ER Canada Inc., a Calgary, Alberta-based energy exploration and production company, filed an NOI on March 11, owing approximately $4.3 million in unsecured liabilities to the BC Oil and Gas Commission. The company attributes its financial difficulties to a variety of factors, including: (1) significant reductions in oil and gas prices and commodity demand caused in part by the effects of the COVID-19 pandemic; (2) declining production rates due to a lack of capital investment; and (3) the inability to undertake certain repairs due to lack of funds. Since 2019, the company has attempted to restructure its financial affairs and made several attempts to sell the company. However, these efforts were unsuccessful, as previous potential purchasers failed to close the transaction. MNP, which was appointed proposal trustee, has engaged Sayer Energy Advisors to carry out a proposed SISP for the company's assets. Counsel is Stikeman Elliott for the company and Lawson Lundell for the proposal trustee.
March 9, 2021
Copetrex Oil & Gas Co. Ltd., a Calgary, Alberta-based oil and gas company, filed for bankruptcy on March 9, listing approximately $319.3 thousand in assets and $54.0 thousand in liabilities, including $38.2 thousand to Canadian Natural Resources. The company attributes its financial difficulties to various factors, including declining revenues and significant contractual liabilities on its properties. KPMG is the bankruptcy trustee.
March 9, 2021
Just Energy Group Inc. (TSX:JE), a retail energy provider specializing in electricity and natural gas commodities, with head offices in Mississauga, Ontario and Houston, Texas, filed for protection under the CCAA on March 9. The company and related entities (collectively, the "Just Energy Group") are facing severe short-term liquidity challenges due to the recent unprecedented and catastrophic winter weather event in Texas, which is the Just Energy Group's largest market. The extreme weather event in Texas was colder than anything experienced in decades, causing higher than normal customer demand while also forcing significant supply offline. As a result, the Just Energy Group was forced to balance its demand through spot market purchases. In addition to artificially high electricity costs during the Texas weather event, the Just Energy Group was also exposed to significantly increased ancillary service costs. It estimates that it may have incurred losses and additional costs of up to $312.0 million as a result of the winter storm as well as certain pricing decisions by the Electric Reliability Council of Texas ("ERCOT") and the Texas Public Utility Commission. During these CCAA proceedings, the Just Energy Group will be receiving a US$125.0 million DIP loan from one of its term loan lenders in order to meet its North American obligations, including payments to ERCOT totalling more than $250 million in the near term. If these amounts are not paid, ERCOT can suspend the Just Energy Group's market participation. FTI Consulting was appointed monitor. Counsel is Osler for the Just Energy Group, TGF for the monitor, Torys for the term loan lenders, McCarthy Tétrault for the credit facility lenders, and Cassels for the DIP lender.