Oil patch insider: PNG tough on Santos-OSH; Hendrix strikes back; Lance/Wulff quarrel?
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Kay Cashman Petroleum News
Things could be worse for oil and gas companies in Alaska: Upstream 8-8-21, “PNG government changes the rules again on offshore project …. Operator of Pasca project ‘extremely disappointed’ that agreed fiscal terms have been changed.”
The State of Alaska is not changing the rules. Nor do Alaska’s governor and the U.S. president demand what Papua New Guinea’s Prime Minister James Marape is demanding before his government will approve the Santos/Oil Search merger. Marape said the deal must pass a “national interest test,” including making the Pacific island the combined company’s corporate headquarters.
According to a recent story in The Australian, Credit Suisse predicted PNG “could use its merger approval as leverage to grab more value for the country, noting it has knocked back proposed deals in other sectors.”
According to an Aug. 4 press release from his office Marape said: “Oil Search Limited is a prominent PNG company whose activities comprise a significant percentage of PNG’s GDP and provides the livelihood to thousands of Papua New Guineans both directly and indirectly.”
The prime minister not only wants that to continue, but to increase.
Marape said his government’s top priority is to ensure that projects such as Papua LNG, Pasca A and Pn’yang are progressed as soon as possible; something he sees as doable with the merger of Santos and Oil Search into a bigger and better financed company.
“We do not wish for the largest oil and gas company operating in our country to simply be a branch office of a foreign company,” Marape said.
John Hendrix strikes back On Aug. 9, a Law 360 headline read: “Alaska Oil Co. Furie Execs Hit With $100M Suit In Texas.”
John Hendrix, who is the president, CEO and owner of the new Furie companies, thought the headline and story that followed were damaging to his firms.
He wrote to Law 360 the next day, saying “Your article implicates us! As the purchaser of the Furie companies you are causing great damage to us,” adding that he and his people have spent the last year trying to repair the reputation of Furie.
“We are an Alaskan company; the old Furie was not owned by Alaskans,” Hendrix wrote to Law 360. “This has nothing to do with the New Furie post-bankruptcy.”
On Aug. 11, HEX Cook Inlet LLC sent out a press release explaining its position.
HEX Cook Inlet is a privately held Alaskan owned and operated independent oil and gas company, which is partly owned by Hendrix. It includes Furie Operating Alaska LLC, Cornucopia LLC and Corsair LLC.
“Law 360 has reported a $100 million lawsuit has been filed against the previous officers of Cornucopia Oil & Gas LLC and its wholly owned subsidiary Furie Operating Alaska LLC. Filed in Texas this lawsuit does not target HEX Cook Inlet LLC which purchased the Julius R platform and Kitchen Lights field assets in bankruptcy court in July 2021.”
“In the past year, since acquiring Furie, we have made great inroads and have a vibrant gas field that continues to feed southcentral Alaska,” said Hendrix, president and CEO of HEX. “The target of this lawsuit … are the previous officers and controlling parties of Furie. My company is not impacted, and we will continue to grow to meet the Alaska consumer needs.”
The lawsuit was filed Aug. 6 by Clingman & Hanger Management Associates LLC, trustee of the Furie Litigation Trust. The suit alleged “the malfeasance of all the officers and controlling parties,” forced Furie into bankruptcy where its assets - “previously valued at hundreds of millions of dollars” - were sold for “a mere $5 million.”
Clingman & Hanger was established as trustee via a court order in Furie’s Chapter 11 bankruptcy case, which was filed in the U.S. Bankruptcy Court for the District of Delaware on Aug. 9, 2019. That voluntary petition listed approximately $450 million in debt. The company said it planned to sell its assets, which it said had an estimated value of less than $50 million.
Some of the defendants named in the recent lawsuit and listed in Law 360’s article as formerly associated with Furie, were Kay Rieck, described as the “de facto head of Furie”; Furie COO Thomas E. Hord; CFO David Elder; internal geologist and chief technical adviser Bruce Ganer; general counsel Michael Anthony Nunes and two law firms that employed Nunes; and Rieck-owned Helena Energy LLC, which the suit alleged was founded as the “natural gas marketing arm to Furie,” and like all the other defendants, is connected to the former Furie operation.
“Rather than continuing to operate Furie in a manner intended to maximize its value, Rieck and certain defendants implemented a brazen scheme to divert Furie’s cash to entities secretly owned by them,” the suit contends. “Together, they caused Furie to drill for fictitious gas using a company they secretly owned, sell gas at a loss to Rieck-owned entities and pledge/transfer valuable tax credits to Rieck-owned entities without consideration.”
The Aug. 6 lawsuit was filed in Texas District Court in Harris County.
Lance, Wulff phone tussle? The Aug. 8 Petroleum News story “Pikka in play,” suggested ConocoPhillips would be a likely buyer for Oil Search’s Pikka development, since ConocoPhillips holds most of the surrounding leases and infrastructure.
There has been no public indication from ConocoPhillips that it has an interest in acquiring any of operator Oil Search’s North Slope acreage.
Santos, which will own Oil Search’s assets if the merger is approved, has not previously expressed an intertest in Alaska.
But Ryan Lance, CEO and chairman of ConocoPhillips, has been clear that he is open to acquisitions, particularly near the company’s existing operations.
According to an Aug. 10 article in The Australian that was based on unnamed sources, in late 2020 a “heated phone call” took place between then-Oil Search CEO Keiran Wulff and Lance about a potential buy-in to Pikka.
Without apparently understanding Pikka’s value or Lance’s skills as a level-headed businessman, the article said the phone call reduced “the chance of an equity stake being sold to the US giant and putting Oil Search on the back foot when Santos pounced” with its merger proposition.
Wulff “baulked at the terms, including giving up its position as operator of the asset known as Pikka, leaving the discussions at a stalemate. A tense discussion with Mr Lance over the impasse led to Mr Wulff questioning Conoco’s track record on the North Slope, which ‘went down like a lead balloon,’ according to one source,” The Australian reported.
For more information on The Australian’s reports, visit the publication’s website at https://www.theaustralian.com.au/.
Alaska BLM loses Padgett, Murphy The Biden administration has pulled Chad Padgett, director of the Bureau of Land Management’s Alaska office and a Trump era appointee, out of the office and transferred him to BLM’s headquarters, where he will serve as a senior adviser. The administration has also transferred associate state director Ted Murphy.
Tom Heinlein, Anchorage district manager for BLM, will take over as acting director.
The 120-day federal moratorium on “involuntary reassignments” ended three weeks ago, which means Interior Secretary Debra Haaland can change the jobs of senior staffers.
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