In a sign that times are getting tougher in the petroleum patch, Denver-based Warren Resources has called off its sale of coalbed methane assets in southern Wyoming to Escalera Resources Co.
The reason: Buyer after low natural gas prices left it unable to make payments on $36.9 million in debt.
Escalera agreed to buy Warren’s assets in the Washakie Basin in south central Wyoming for $47 million, with $42 million payable in cash at closing. But Escalera’s filing makes the deal untenable.
“Warren does not expect to consummate the previously announced sale of (coalbed methane) assets to Escalera and is taking steps to terminate the agreements. Warren continues to consider all strategic options for these assets,” the company said in its third-quarter filing Monday.
More petroleum producers are selling off or swapping holdings in their less profitable fields, often to pay down debt, and concentrating on their strongest areas.
But it is unusual for a buyer to go bankrupt in the middle of a deal and Escalera, if anything, has shown chutzpah in the face of rapidly deteriorating commodity prices.
In summer 2014, Escalera said it was looking into the feasibility of building a $1.8 billion plant in Wyoming to convert its
In September of last year, Escalera convinced Societe Generale to extend it $50 million on a new $250 million credit facility, an infusion that allowed Escalera to strike the deal with Warren Resources in June.
But in a quarterly filing made in August, Escalera said that it was in default on its new credit facility and operating under a letter of forbearance.
The public company, with a market value of $77.2 million in 2011 and $37.5 million last year, voluntarily delisted from the NASDAQ stock market last month. It shares were valued at 2 cents each on Tuesday.
The company, formerly known as Double Eagle Petroleum, last year reported having 27 employees. Its offices are at 1675 Broadway in Denver.
Warren Resources consolidated offices in New York and Roswell, N.M., and moved operations to Denver at the end of September.
Warren reported a net loss of $186.1 million in the third quarter, driven mainly by a $175.7 million write-down on its oil and gas properties.
Warren’s assets are mainly concentrated in southern California and Pennsylvania, along with the Wyoming holdings that it will now have to keep.
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com
