MEDICINE HAT – The city of Medicine Hat is writing off $403,355.21 it hasn’t received from an energy company that went under.
The city was in a 50-50 partnership with Spyglass Resources Corporation for the gas wells in the Atlee natural gas field.
In November of 2015 the company entered into receivership. The city was an unsecured creditor of Spyglass at the time.
In May 2016 Spyglass’s ownership of the wells in the Atlee area were sold to Stanling Energy Ltd as part of the receivership proceedings.
The city did try to collect on the debt, but did not recieve any money.
In November of last year Spyglass entered the bankruptcy process. Because the city received no money during the receivership process it’s unlikely the city will receive any of the $403,355.21 still owing during the bankruptcy process.
Mayor Ted Clugston said Spyglass was a victim of low gas prices and the downturn in the economy.
“In the private sector with the oil and gas industry, especially with the gas players, they are going bankrupt,” he said.
The write-off will be accounted for in the Natural Gas and Petroleum Resources division budget for 2017.
Following the financial crisis in 2008, which saw many companies go under, Clugston said the city changed the way it does business with the private sector to ensure they wouldn’t be stuck with big bills in the future.
“We basically have to have a bond or something that proves that they’re going to be able to pay their bills,” Clusgston said. “We ask for their bills to be paid up front now, we don’t give anybody 90 or 120 days like they did in the old days.”
However, there are some partnerships that still exist that were made before those changes. The deal with Spyglass Resource Corporation was one of them.
“We do have some legacy partners who have run into trouble and often times we will have to pay some of their receivables,” Clugston said.
The city said continued low prices for commodities, especially gas, continue to be a concern.
Because of the conditions faced by the industry, the city says it closely monitors its partnerships and makes efforts to collect any outstanding debts if those partners appear to be at risk of defaulting on payments.
