Mustang owners miss first $3.1M loan payment to AIDEA

  • Crude oil is loaded to a tanker truck at the Mustang Operations Center near the Kuparuk River field on the North Slope. Oil finally started flowing from the project in November, but the owners of the project missed a $3.1 million payment to the state development bank the prior month and it remains outstanding as of Dec. 24. (Photo/Courtesy/Alaska Industrial Development and Export Authority)

Small quantities of oil are flowing from the long-delayed Mustang project on the North Slope but its owners are late on their first loan payment to the state.

Caracol Petroleum LLC, a primary owner in the Southern Miluveach Unit that holds the Mustang development, missed its first loan payment due in October to the Alaska Industrial Development and Export Authority under a recently restructured financing plan, according to authority spokesman Karsten Rodvik.

The loan is structured for a quarterly payment schedule.

Rodvik wrote in an email that AIDEA was due to receive a $3.1 million payment from Caracol on Oct. 1 based on a complex financing arrangement the sides agreed to in May, but the payment hasn’t materialized as of Dec. 23.

Caracol also incurred an additional $310,000 in late fees and penalties for not curing the missed payment within 30 days, per the agreement, according to Rodvik.

“AIDEA and Caracol’s shareholders, the working interest owners in the Southern Miluveach Unit, are continuing to hold discussions with an aim to satisfactorily resolving the status of AIDEA’s loan to Caracol, and the development of the Mustang field,” he wrote.

In late May AIDEA sold its majority interest in the holding companies — Mustang Operations Center-1 LLC and Mustang Road LLC — that were set up under the original deals for the project’s processing facilities and the road and pad to Caracol for $64 million plus $6 million in accrued interest, according to authority documents.

Caracol owns a 60 percent interest in the state leases that comprise the Southern Miluveach Unit through its original stake in the project and its subsequent purchase of the Mustang holding companies, according to Alaska Division of Oil and Gas records.

Anchorage-based Brooks Range Petroleum Corp., which operates the field, began producing oil from Mustang in early November after years of delays brought on by collapsed oil prices and other financing challenges. Majid Jourabchi, CEO of Brooks Range’s parent company Houston-based Thyssen Petroleum, said last month that the company started producing about 620 barrels of oil per day from the North Tarn 1-A well.

Alaska Oil and Gas Conservation Commission records show Brooks Range produced an average of 478 barrels of oil over 23 days from the well in November.

The Mustang project is adjacent to the southern portion of ConocoPhillips’ large Kuparuk River field and also near the Nanushuk oil project being developed by Oil Search. The field is estimated to hold about 22 million barrels of oil and could peak at production rates of about 12,000 barrels per day when fully developed.

Jourabchi and representatives for Caracol or its parent company, Singapore-based Alpha Energy Holdings could not be reached for comment.

AIDEA, the state’s development bank, first agreed to invest in Mustang infrastructure in 2012 when the authority’s board approved $20 million to finance the lion’s share of a five-mile gravel road and 19-acre drilling pad needed to start developing the project. At the time Brooks Range leaders said they hoped to have Mustang in production by late 2014.

In April 2014, AIDEA committed another $50 million equity investment in the $225 million Mustang oil processing facility. Brooks Range leaders said then that the project would start production in late 2015 and likely peak in 2017.

By February 2016 management for the authority and Brooks Range agreed to put Mustang in “warm standby” as oil prices in the $30 per barrel range hampered the ability to secure other financing options.

The recent oil production was achieved through a scaled-back development plan that utilized modular early production facilities. Brooks Range officials have said they intend to install larger, permanent facilities that would allow for more production once the project’s economics provide for expansion.

Elwood Brehmer can be reached at [email protected].

12/24/2019 - 1:27pm