• Wednesday, 16 May, 2012

Cougar gets protection from creditors

Tamed: Cougar Oil & Gas files for protection from creditors after asset sale falls through

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Luke Johnson , Luke Johnson , Luke Johnson , Luke Johnson

 03 February 2012 23:53 GMT

Calgary-based Cougar Oil & Gas has obtained protection from creditors after it was unable to pay a regulatory fee when a potential buyer of some of its assets defaulted on its agreement.



Cougar had agreed on 15 November last year to sell some of its non-core assets to an unnamed buyer that would have relieved Cougar of paying the entirety of the C$630,000 long-term well-abandonment liability deposit required by the Energy Resources Conservation Board of Canada (ERCB).

The potential buyer requested multiple extensions to close the deal and paid only part of the ERCB deposit. It later defaulted on the entire purchase.

The ERCB put Cougar on notice to pay the required deposit. When the company could not pay, ERCB ordered all Cougar-operated wells and facilities shut in and closed until the deposit was paid.

Cougar shut its operations starting on 23 January and “continues to seek sufficient financing to get the wells turned back on”, the company said in a statement late on Friday. Cougar has appealed the ERCB ruling, and is seeking damages due to the defaulted deal.

With its main operations shut, Cougar has had to rely on its non-operated production to keep up its day-to-day operations and to pay its creditors.

Combined with operational difficulties, a fall in commodity prices and trouble in the euro zone – where the company gets much of its financing – Cougar has been strapped for funds.

The protection, granted by the Alberta Court of Queen's Bench under the Companies' Creditors Arrangement Act, will allow Cougar to continue with its day-to-day operations at least until 2 March, when the protection can be extended.

If the board of directors is unable to come up with a plan to pay its creditors, Cougar “will likely be placed into receivership or bankruptcy”, the company said.

“The lack of available financing for junior companies like [Cougar] has impacted our ability to access capital or to identify strategic alternatives to enable us to proceed,” said chief executive William Tighe.

"We have been actively seeking options to manage our liquidity and to raise the capital we need to proceed with developing our assets.”

He said he remains “confident” that Cougar’s Trout assets in Alberta “can be developed into long-term commercial facilities", but Cougar needs another C$200,000 to properly test a well drilled there last spring.

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