Hendrix bid to acquire Furie revived with AIDEA loan
An Alaskan bid for a struggling Cook Inlet gas producer appears to be back on following revisions to a state-backed loan for the purchase.
The Alaska Industrial Development and Export Authority board of directors on April 15 approved technical changes to a March 4 resolution authorizing a loan up to $7.5 million to Hex LLC, a company formed late last year by longtime Alaska oil and gas industry player John Hendrix.
Hendrix, through Hex, submitted the winning $15 million bid in a December bankruptcy auction for Furie Operating Alaska, a small Texas-based natural gas producer that operates the Kitchen Lights Unit and has contracts to supply a handful of Southcentral utilities.
Originally from Homer, Hendrix was general manager of Apache Corp.’s operations in Cook Inlet prior to becoming former Gov. Bill Walker’s oil and gas policy adviser in 2016.
But February court filings by Hex in Furie’s ongoing Chapter 11 bankruptcy case asserted that the auction was advertised as an asset sale but conducted as an equity sale to keep Furie in control of its Inlet operations and eligible to receive outstanding refundable tax credit payments from the state. In its bankruptcy filing, Furie claimed $105 million in outstanding credits owed by the state.
Uncertainties stemming from a royalty claim filed by three minority owners in the state leases that Furie operates are alleging collectively shorted them an estimated $50.7 million also prevented Hex from obtaining financing for the sale, Hex attorney David Bundy wrote at the time.
Attorneys for Furie and its primary lenders countered in separate court filings that Hex did not negotiate “in good faith” during the process, an allegation Bundy disputes.
With Hex unable to finance the purchase, one of Furie’s primary lenders New York-based Melody Capital Partners LP attempted an acquisition by foreclosure through a firm it formed with GFR Holdings LP of Dallas, Kachemak Exploration LLC.
Melody Capital Partners was one of several lenders that collectively loaned approximately $244.5 million to Furie, according to court filings.
However, Hendrix told the AIDEA board April 15 that he recently signed an agreement to acquire Furie and his company is now moving towards a June 30 closing date. An omnibus court hearing is scheduled for May 8.
Hendrix and others involved in the case have declined to discuss details of the proceedings as they are ongoing, but he said to AIDEA leaders that he hopes to increase in-state employment within Furie.
Sources said the global recession that has accompanied the COVID-19 pandemic and caused significant downturns in financial and energy markets largely scuttled the Kachemak Exploration proposal.
Hendrix said Furie works with Alaska-based contractors, but the company’s workforce is mostly Lower 48 workers.
According to a memorandum outlining the $7.5 million loan, Hex’s purchase would initially provide 15 new resident jobs on the Kenai Peninsula and support another 300 indirect jobs.
“We see a great opportunity to — it’s called studying the rocks and getting back to base management,” Hendrix said to the AIDEA board, adding that he hopes to look for more drilling opportunities for oil and gas.
Furie officials said in 2017 they planned to work on developing oil prospects in the Kitchen Lights gas field, but those plans were largely scuttled because of the state’s delay in repaying millions of dollars in oil and gas tax credits the company earned for its previous work, according to the company’s filings with the state Division of Oil and Gas.
The company filed for Chapter 11 bankruptcy protection Aug. 9 in federal Bankruptcy Court for the District of Delaware. According to the company’s bankruptcy petition, Furie owed lenders approximately $440 million when it filed for Chapter 11 protection and was also owed roughly $105 million in refundable tax credits from the State of Alaska.
The company installed the Julius R platform in the Kitchen Lights field in 2015, which at the time was the first new production platform the Inlet built since the 1980s.
Furie officials estimated the value of the company’s assets at between $10 million and $50 million in their initial bankruptcy filings.
The financial challenges were nearly continuous for the company, which had net gas sales of $25.4 million and absorbed a net loss of $58.5 million in 2017, according to the bankruptcy filings. The situation worsened in 2018 when the company sold $42.8 million of natural gas but took a loss of nearly $152 million.
Furie lost $21.4 million in the first quarter of 2019, when a freeze-up in a gas production pipeline kept the company from supplying HEA and Enstar with gas for more than a month. Once gas deliveries resumed, Furie was only able to supply Enstar with less-than-contracted amounts for several months as well.
Elwood Brehmer can be reached at [email protected].