|
Rig to be offered at foreclosure sale The rig belongs to Naknek Electric Association, a small Alaska co-op that found mainly trouble with geothermal drilling effort Wesley Loy For Petroleum News
A U.S. Bankruptcy Court judge has approved a foreclosure sale for a drilling rig used in a failed geothermal exploration effort in Southwest Alaska.
The rig belongs to Naknek Electric Association, which was forced to file for Chapter 11 bankruptcy protection from creditors in September 2010. The small cooperative serves villages in the Bristol Bay region.
As Petroleum News went to press, it was unclear exactly when the foreclosure sale would be held.
Anchorage Bankruptcy Judge Donald MacDonald’s Sept. 11 order indicates the sale could occur as soon as Sept. 28.
The sale will be held at the law offices of Burr Pease & Kurtz in Anchorage, the judge’s order says.
How sale will work The rig is a National 1320 model that Naknek Electric purchased to conduct geothermal drilling.
The rig remains at the site of the one and only well the co-op managed to drill during its troubled geothermal campaign. The well, known as G-1, is near the village of King Salmon.
The expectation is that one of the co-op’s major creditors, oilfield services company Baker Hughes, will prevail at the foreclosure sale.
Unlike other prospective buyers, Baker Hughes will be entitled to credit bid, MacDonald’s order says.
Baker Hughes is offering to help plug and abandon the problem-plagued G-1 well, something the co-op can’t itself afford to do.
Others bidding at the foreclosure sale will have to offer all cash, starting at $7.5 million, the judge’s order says.
If no one offers more than that, the rig will go to Baker Hughes under a complex “collateral disposition and settlement agreement” negotiated among parties to the bankruptcy case.
Rig resale expected After the foreclosure sale, Baker Hughes is expected to resell the rig, most likely to an oil and gas explorer in the Cook Inlet basin.
Two companies, Cook Inlet Energy LLC and NordAq Energy Inc., have indicated an interest in the rig and have sent people to examine it, court papers show.
Before the rig is barged out of the region, Naknek Electric is hoping to use it to plug and abandon the G-1 well. The co-op has applied to the Alaska Oil and Gas Conservation Commission for permission to conduct the operation.
The judge’s order says if the co-op “does not timely commence or complete” the plugging and abandonment, Baker Hughes will be permitted to make a “substitute equipment election.”
Proceeds from the sale of the rig and accessories are not expected to nearly cover the co-op’s financial obligations.
By the date it filed for bankruptcy, Naknek Electric said it had run up some $40 million in debt that was “in one way or another associated with the geothermal project.”
The co-op embarked on the geothermal drilling effort in hopes of establishing an alternative to burning expensive diesel to generate electricity. It had hoped to drill multiple geothermal wells, and spent $11.5 million to buy and improve the rig.
The co-op’s geothermal prospects looked decent, with the volcanic Katmai National Park and Preserve not far from its service area.
But Naknek Electric encountered all manner of money and technical problems.
| 