Trident closes its doors

The future of a Calgary-based natural gas exploration company’s wells and office in the Fort Assiniboine area is in doubt after the corporation ceased operations last week.

On May 1, Trident announced it would hand over the care of its 4,700 wells to the Alberta Energy Regulator (AER). The board of directors also resigned and all 33 of its employees, including 61 contractors, were terminated.

A media release from Trident stated that its abandonment and reclamation obligations are estimated to be $329 million and it doesn’t expect any financial recovery for shareholders or unsecured creditors.

The company blamed its demise on low natural gas prices and high lease and property tax bills, along with capacity constraints on TransCanada Corp.’s NGTL gas pipeline system.

Trident also stated that restructuring and sales process with its lenders failed due to issues arising from January’s Supreme Court of Canada (SCC) decision on insolvent Redwater Energy.

In its decision, the SCC stated that energy companies must fulfil their environmental obligations before paying back creditors in the case of insolvency or bankruptcy, overturning lower court decisions that had favoured bankruptcy law over provincial environmental responsibilities.

“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. Without regulatory collaboration and clarity, Trident is unable to address its near-term liquidity needs and has no financial ability to continue operating. We fear that many other companies may falter without clear, sound policymaking post-Redwater,” Trident Exploration stated in the release.

In response, the AER issued its own release stating it had been working with Trident “for several weeks to address concerns about its ability to continue operating to ensure that their assets end up in the hands of responsible operators and that end-of-life obligations are addressed to the greatest extent possible.”

On April 29, after the AER was informed that Trident planned to cease operations, it ordered the company to address end-of-life obligations for its energy licenses by decommissioning its sites, posting financial security, or transferring the sites to responsible energy companies.

A day later, however, the AER was told that the Trident board resigned in bulk and all its employees and contractors were gone.

The AER stated that while they understood the market challenges facing the company, Trident had a responsibility to ensure that safety and environmental requirements are met.

“The AER will pursue all options to ensure that Trident’s infrastructure is transferred to responsible operators, safely decommissioned, or, as a last resort, transferred to the Orphan Well Association. Many of Trident’s wells were still operating and, once transferred to responsible operators, can still contribute to royalties, keep Albertans working, and deliver value to our economy.”

Local reaction

Woodlands County Fort Assiniboine/Timeu Coun. Dale Kluin said it was ironic that on the day that the new Alberta Premier Jason Kenny swore in his cabinet, spurring a new sense of optimism about the future of the oil and gas industry, Trident Exploration announced it was shuttering down.

He said that although the county was not given any advanced warning, the announcement came as no surprise.

“I know they have been in difficulty for some time,” he said, noting he believed there were only four or five people still working in the Fort Assiniboine office.

In June 2017, Trident’s CAO Mark Smith asked Woodlands County to waive half of the $180,000 penalty it received for late payment of its 2016 property tax bill.

He stated the reason why they weren’t able to pay its $1.3 million tax bill on time was because they were in the middle of restructuring debt obligations.

Until that was completed, they were restricted from paying the county its taxes due to a court order.

On Feb. 5, Woodlands County interim chief administrative officer Pat Vincent said two energy companies were in arrears a total of $4.473 million in property taxes for 2018.

He stressed that if the taxes weren’t paid, by 2021 “we’ll be looking at a very bleak situation of being close to being bankrupt.”

When asked if Trident was one of the oil and gas companies that were in arrears of their 2018 property taxes, Kluin said he couldn’t comment.

He said he is hopeful the AER will be able to find a company that can take over its obligations and that a business will be able to take advantage of Trident’s empty office building in the hamlet.

Until that happens, he is concerned that the company walking away from its assets could mean safety and environmental issues in the Fort Assiniboine area.