By Collin Gallant
Southern Alberta Newspapers
A oil exploration company party to a lawsuit launched by the City of Medicine Hat against the federal government will retain its Manyberries assets as it goes through bankruptcy proceedings.
LGX Oil + Gas entered into Court Creditors Arrangement Act protection on June 8 arguing that a 2013 federal environmental protection order in areas south of Medicine Hat rendered its major operations economical.
Medicine Hat’s public exploration company as well said its Manyberries oilfield is severely hampered by development restrictions aimed at protecting habitat of the greater sage grouse.
Receivers for LGX suggest in court documents filed in November that the company’s best asset is Manyberries and its pending suit against Ottawa.
Therefore, officials from Ernst & Young, the receiver, state that all non-core properties should be sold in order to fund some investment at Manyberries to keep production up and reduce eventual abandonment liability.
“Based on … independent legal advice, the Receiver has decided to maintain possession … throughout the (court) action and not attempt to sell the Manyberries properties until the action is resolved,” reads a report to Court of Queen’s bench filed on Nov. 15.
It further states the legal issue could take three years to be concluded.
The sales strategy also aims to lower the company’s liability as calculated by the Alberta Energy Regulator, which requires abandonment funds be built up throughout operation to ensure proper shut-in of the wells.
Without reinvesting, the property — which has about $4 million annual revenue — would need to be shuttered.
The assets appear on Sayer’s Energy Advisors this month with a deadline for open bids set at Dec. 15. The smaller assets are located in two blocks, one north of Retlaw and Vauxhall, and another in the Alberta Bakken play at Bow Island and the Blood Reserve.
Proceeds would also be used to pay property tax, repay an interim $1.5 million operating loan, and fund the receivership action.
The major creditor of LGX is Alberta Treasury Branch, which is owed $32 million, and which launched the receivership action.
The City of Medicine Hat purchased the former Manyberries holding of Chinook Energy at a special council meeting in early 2012 for $43.8 million. At that time administrators said potential to increase production would payback the investment in seven to 10 years.