While oil and gas companies are reporting record production, some are struggling financially. Witness the decision last week by a federal bankruptcy judge who approved the sale of most of San Antonio-based All American Oil and Gas Inc.s assets to its largest creditor.
All American filed for bankruptcy last November. Last week, Chief U.S. Bankruptcy Judge Ronald King in San Antonio approved the move by Santa Monica, California-based Kern Cal Oil 7 to acquire the assets. The firm had $145 million in secured claims and its bid was the amount of money owned by All American Oil and Gas.
“We very quickly were able to arrive at a resolution,” Richard Wynne, a lawyer for AAOG, told King at a Thursday hearing. “While not ideal, and certainly not what the company sought or what shareholders liked, (it) is what the reality is in terms of value in the oil and gas business and the very extreme price volatility that we saw.”
“AAOG shareholders stand to receive up to $5.5 million in royalty payments if certain pricing conditions are met,” said bankruptcy lawyer Deborah Williamson, who also represents the company.
AAOG is the parent company of exploration and production company Kern River Holdings and a power company called Western Power and Steam Inc. All three entered bankruptcy in November.
Kern River Holdings has a 215-acre lease in the Kern River Oil Field near Bakersfield, Calif., where it operates 182 wells. Western operates a 20-megawatt, co-generation facility adjacent to Kern River Holdings’ operations.
KCO acquired AAOG’s debt in mid-October and soon after declared AAOG in default on the loans for failing to abide by certain obligations.
AAOG President Patrick Morris accused KCO of attempting to strip AAOG and its subsidiaries of their equity as a way to get their assets “on the cheap.”