CorEnergy tenant defaults on Pinedale system

The low oil price environment continues to take a toll on energy companies, with Ultra Petroleum one of the latest victims.

CorEnergy Infrastructure Trust tenant Ultra Wyoming and guarantor Ultra Petroleum have defaulted on the lease for the Pinedale Liquids Gathering System. 

Houston-based Ultra Petroleum filed a voluntary petition to reorganise under Chapter 11 in Texas on 29 April, and CorEnergy said in a statement that the filing and the circumstances prompting the filing constitute defaults under the Pinedale Lease Agreement. It also represents a stay of CorEnergy's ability to exercise remedies for those defaults. 

According to the filing, Ultra Petroleum carries $3.8 billion in debt, all of which is unsecured. Chief financial officer Garland Shaw said in a statement at the time of the filing that while the bulk of this debt was issued in a more favourable market, “the collapse in oil and gas prices since late 2014 made the debt load too much to bear for the oil and gas company”. 

CorEnergy, owner of one of only a few real estate investment trusts currently being used to house infrastructure assets, said that despite its inability to pursue default solutions, “Section 365 of the bankruptcy code requires Ultra Wyoming to comply on a timely basis with many provisions of the Pinedale lease, including payment provisions. 

In a 29 April 10-Q filing, Ultra Petroleum stated that the termination of the Pinedale Lease Agreement would “significantly disrupt” its ability to produce oil and gas from the Pinedale field, with significant adverse impact to its “business, financial condition, results of operations and cash flows”. 

The parent company of another CorEnergy asset, the Grand Isle Gathering System, filed for Chapter 11 protections in mid-April