A small Calgary natural gas producer is ceasing operation, saying a January decision by the Canadian Supreme Court on responsibility for orphan wells aggravated its financial problems.
Trident Exploration Corp., which produced gas from coalbeds and shallow formations in western Canada, said it is transferring 4,700 wells to the Alberta Energy Regulator and Orphan Well Association. It estimated its abandonment and reclamation obligations at $329 million.
“Behind these obligations, we do not anticipate any recovery for shareholders and unsecured creditors,” it said in a press release. “Likewise, any recovery for secured lenders is highly uncertain.”
Trident said, “Extremely low natural gas prices and high surface lease and property tax payments…exhausted the liquidity of the company.”
Amplifying its trouble was the January “Redwater decision” in which the Supreme Court overturned Alberta court decisions allowing receivers and trustees to renounce unprofitable assets and escape well-abandonment obligations.
“As many have speculated and we have now unfortunately proven, the Redwater decision has had the unintended consequence of intensifying Trident’s financial distress and accelerating unfunded abandoned-well obligations,” it said. “We fear that many other companies may falter without clear, sound policy-making post-Redwater.”
Warning of capital flight from Canada because of regulatory uncertainty, it said, “We expect that the Orphaned Well Association may grow exponentially.”
