Southern Pacific Seeks Creditor Protection in Price Rout

Southern Pacific Resource Corp. became the first company in the Canadian oil sands to seek creditor protection as early-stage developers struggle to survive with crude prices close to 5 1/2 year lows.

Southern Pacific, based in Calgary, received an order from an Alberta court shielding the company from claims by its lenders as it seeks to restructure its debt and pursue strategic alternatives including asset sales, the company said in a statement on Wednesday.

The oil-sands developer is in talks with representatives of its first-lien term loan and holders of more than 75 percent of the senior secured second-lien notes and more than 50 percent of the convertible debentures, according to the statement.

Southern Pacific follows GASFRAC Energy Services Inc., a Calgary-based oil-services company that said Jan. 15 it had filed for creditor protection, as clients confront debt obligations with a seven-month price rout eroding cash flow. North American producers are cutting spending, staff and dividends to stay afloat with crude prices below $50 a barrel.

Other small oil-sands developers have warned of the risks of high debt with low prices. Connacher Oil and Gas Ltd. on Jan. 15 said it had put itself up for sale as it seeks to fix its liquidity and capital structure. Laricina Energy Ltd., a closely held developer, said on Jan. 2 it was in talks with lenders after defaulting on debt.

Southern Pacific has protection from creditors for an initial period expiring Feb. 20, the company said.

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