Oil Patch Shenanigans

[fotze2]

I worked for the orphan fund a million years ago. The EUB has known about this problem forever. One of the first was when Imperial Oil sold a field (I think it was big valley) to a dentist. He obviously knew his stuff and promptly ran a pile of crap into the ground.

Every single person in the patch knew about Sequioa as it happened. Also, there's at least ten more Sequioas out there I know of and probably more to come. I could list them.

This one called Tallahassee, I had no idea what they were about so I went to the interview (since I was currently working at a much larger schitco and wanted out). It was like a Hunter S Thomson inspired movie. Interview was at lunch time for some reason.

No sign on the door or a way to get in. I try phoning the HR guy, no answer for fifteen minutes. Finally comes out some other door down the hall, dude looked like Kuato from Total Recall complete with deformed mini hands. Took some strength to shake the little baby hand.

Go into the interview and the CEO is like 19 years old. All the properties were a complete nightmare. Who in the fata gave YOU this much money for this giant turd of an asset base. See they are headed the same direction.

Another one, Long Run, holy shat. This one I knew was bad it was when oil went negative just after getting punted for the first time. Chinese backed company. Had heard their CFO wouldn't rates being charged for services so just wouldn't pay the invoices and would try to re-negotiate. That's not how business works here buds, you negotiate before the work is done, definitely not after. I guess the Hell's Angels was affiliated with one of the companies and came to Calgary went went up to the floor to demand payment and got said payment.

Anyway, interview with these guys. One very frail asian dude and charismatic white puppet CEO, went very well I thought, 40 minutes in after saying absolutely nothing the whole time, slam his fist on the table and shouts "Enough!". I guess it didn't go well. White guy fired the next day. Dodged that bullet.

Definitely would find another industry if I could go back in time.

[Fuzz]

My investment advisor had me in Long Run before the crash and assured me "if anyone comes out of this crash looking good, it's gonna be them. Absolutely keep this one." ####ing ####.

[Nyah]

Originally Posted by fotze2

Another one, Long Run, holy shat. This one I knew was bad it was when oil went negative just after getting punted for the first time. Chinese backed company. Had heard their CFO wouldn't rates being charged for services so just wouldn't pay the invoices and would try to re-negotiate. That's not how business works here buds, you negotiate before the work is done, definitely not after. I guess the Hell's Angels was affiliated with one of the companies and came to Calgary went went up to the floor to demand payment and got said payment.

Can confirm

[fotze2]

Originally Posted by Fuzz

My investment advisor had me in Long Run before the crash and assured me "if anyone comes out of this crash looking good, it's gonna be them. Absolutely keep this one." ####ing ####.

You found someone more evil than Long Run?

[fotze2]

Originally Posted by Nyah

Can confirm

I was never 100% sure of that story but plenty of people say they can confirm that.

[Fuzz]

Originally Posted by fotze2

You found someone more evil than Long Run?

Ya...sadly.

[Voodooman]

Originally Posted by Fuzz

Their must be laws around creating a company to dump all the toxic #### from another company in to, and then walk away, right? Like, this seems like a giant loophole companies in any industry could employ to escape debt and obligations, while boosting the value of the remaining company. Or do I live in a fantasy world where corporations don't just do whatever the #### they want?

This is a pretty common tactic in insolvency proceedings these days, it's called a Reverse Vesting Order. You put your company (MainCo) into CCAA proceedings, create a new company (SpinCo), and apply to the insolvency courts for an order to move all liabilities and toxic assets from MainCo into SpinCo, in order to facilitiate a sale of MainCo. This is often done in conjunction with a stalking horse bid for MainCo.

It's been used in the cannabis industry a number of times, unsurprisingly. A company is insolvent, sheds all the debt into SpinCo, "new" bidders emerge to purchase MainCo, and SpinCo is bankrupted with all the debt. It's basically a get out of jail free card for badly run companies. There have been multiple cases where an RVO has been successfully executed, MainCo has started fresh, and less than 2 years later, they are back in creditor protection, with even more debts than the first time around. I put "new" as there have been some pretty tenuous apparent arms length sales under these RVOs.

Basically, in the current climate, there is no penalty for bad management. Insolvency courts seem to be operating under t-ball rules. The score doesn't matter, everyone gets a turn and as long as you tried, then you are a winner.

Thanks for attending my TED talk on what is wrong with our economy.

[Fuzz]

But if you try selling your house to your wife for $1 and then default on your mortgage, suddenly the bank is all uppity and takes it. What a system.

[SeeGeeWhy]

Originally Posted by Voodooman

This is a pretty common tactic in insolvency proceedings these days, it's called a Reverse Vesting Order. You put your company (MainCo) into CCAA proceedings, create a new company (SpinCo), and apply to the insolvency courts for an order to move all liabilities and toxic assets from MainCo into SpinCo, in order to facilitiate a sale of MainCo. This is often done in conjunction with a stalking horse bid for MainCo.

It's been used in the cannabis industry a number of times, unsurprisingly. A company is insolvent, sheds all the debt into SpinCo, "new" bidders emerge to purchase MainCo, and SpinCo is bankrupted with all the debt. It's basically a get out of jail free card for badly run companies. There have been multiple cases where an RVO has been successfully executed, MainCo has started fresh, and less than 2 years later, they are back in creditor protection, with even more debts than the first time around. I put "new" as there have been some pretty tenuous apparent arms length sales under these RVOs.

Basically, in the current climate, there is no penalty for bad management. Insolvency courts seem to be operating under t-ball rules. The score doesn't matter, everyone gets a turn and as long as you tried, then you are a winner.

Thanks for attending my TED talk on what is wrong with our economy.

Makes it feel that much better knowing I was too much of an honest doofus to be caught in the crosshairs holding PG and indemnity obligations personally when my construction co hit the wall towards the end of Covid. Its such fulfilling and rewarding work, building new schools and courthouses for the Government.

I'm sure they will look upon my naive, good natured soul and salt of the earth Albertan morals with kindness and generosity when it comes time to enforce all judgements granted on those PGs that are "never used".

Great system. I love life, people, this country and my future.

[SeeGeeWhy]

As much as I love to whine about my self-induced problems, I am not sure we can blame the producers for doing this stuff.

They never own the resources, they just rent the option to produce and market them.

Do landlords get their tenants to bring the property back to pristine reclaimed nature when they move out?

That #### is OURS and its OUR responsibility to deal with it all in the end.

Fotze's stories are hilarious. A similar million years ago I also worked in production, completions, etc. One of the engineers on the team was too clever for his own good and would talk about how he was out there buying old #### wells for a dollar. That mofo had a strong resemblance to Kevin Spacey, I wonder how his bets worked out for him or not.

[GioforPM]

Originally Posted by Robbob

Bankruptcy rules were also a federal so a lot of the creditors got their share of what was left before Alberta did until recently after they took it to the Supreme Court. I think there is a lot of catch up being done from the shenanigans in the past.

Stronger rules and mandatory spends on abandoned wells is just the start. Since the money that operates the OWA comes from levies from industry, I don't think they are too happy since the levy was increased last year.

Insolvency rules are federal, but under the Redwater SCC decision they don't supercede the powers of the environmental regulator (eg AER) to enforce obligations. BUT the regulator is fallible and I think the RVO situation has also tripped it up.

[GioforPM]

Originally Posted by Voodooman

This is a pretty common tactic in insolvency proceedings these days, it's called a Reverse Vesting Order. You put your company (MainCo) into CCAA proceedings, create a new company (SpinCo), and apply to the insolvency courts for an order to move all liabilities and toxic assets from MainCo into SpinCo, in order to facilitiate a sale of MainCo. This is often done in conjunction with a stalking horse bid for MainCo.

It's been used in the cannabis industry a number of times, unsurprisingly. A company is insolvent, sheds all the debt into SpinCo, "new" bidders emerge to purchase MainCo, and SpinCo is bankrupted with all the debt. It's basically a get out of jail free card for badly run companies. There have been multiple cases where an RVO has been successfully executed, MainCo has started fresh, and less than 2 years later, they are back in creditor protection, with even more debts than the first time around. I put "new" as there have been some pretty tenuous apparent arms length sales under these RVOs.

Basically, in the current climate, there is no penalty for bad management. Insolvency courts seem to be operating under t-ball rules. The score doesn't matter, everyone gets a turn and as long as you tried, then you are a winner.

Thanks for attending my TED talk on what is wrong with our economy.

The further problem is that the CCAA used to be about putting together a plan that all creditors voted on, so you had to come up with a deal acceptable to the required majority. RVOs and other sales are done without a creditor vote - so the company just needs to convince the court it's the best deal out there (which the stalking horse supposedly proved).

TBF there was a recent stalking horse deal that created a huge bidding war and all creditors got paid 100%. But others pay a lot less and sometimes zero to unsecured creditors.

[Whynotnow]

Originally Posted by SeeGeeWhy

As much as I love to whine about my self-induced problems, I am not sure we can blame the producers for doing this stuff.

They never own the resources, they just rent the option to produce and market them.

Do landlords get their tenants to bring the property back to pristine reclaimed nature when they move out?

That #### is OURS and its OUR responsibility to deal with it all in the end.

Fotze's stories are hilarious. A similar million years ago I also worked in production, completions, etc. One of the engineers on the team was too clever for his own good and would talk about how he was out there buying old #### wells for a dollar. That mofo had a strong resemblance to Kevin Spacey, I wonder how his bets worked out for him or not.

Is this saracasm? Hope so. Try renting a place and leaving it absolutely destroyed and derelict.

This issue frustrates me, I started out in production, with a reputable company. We looked after our leases from start to finish, reclaimed things, did it right. The EUB would still cite us for things while Joe Schmo oil and gas across the road was an accident waiting to happen but the eub knew they’d get nothing out of them with an enforcement action.

[Weitz]

####cos do what they can to save money. Happens in every industry around the world. What we need is strong laws (provincial and federal) and a strong regulator. But we really have neither of these.

[troutman]

https://joelbakan.com/the-corporation-book/

An eminent law professor and legal theorist, Bakan contends that the corporation is created by law to function much like a psychopathic personality whose destructive behavior, if left unchecked, leads to scandal and ruin.

[Fuzz]

Originally Posted by Weitz

####cos do what they can to save money. Happens in every industry around the world. What we need is strong laws (provincial and federal) and a strong regulator. But we really have neither of these.

It's almost like voting for the same government for decades that caters to the needs of the oil industry while they rake in cash and we fight for table scraps and debate how to clean up their messes hasn't been the best strategy. Who could have known, though?

[fotze2]

I think the AER/AENV was much better to deal with during the Notley years. There was reason and expertise.

[Weitz]

Originally Posted by fotze2

I think the AER/AENV was much better to deal with during the Notley years. There was reason and expertise.

Disagree. There hasn’t been material change before/during/after the notley years.

[SeeGeeWhy]

Originally Posted by Whynotnow

Is this saracasm? Hope so. Try renting a place and leaving it absolutely destroyed and derelict.

This issue frustrates me, I started out in production, with a reputable company. We looked after our leases from start to finish, reclaimed things, did it right. The EUB would still cite us for things while Joe Schmo oil and gas across the road was an accident waiting to happen but the eub knew they’d get nothing out of them with an enforcement action.

No, it's not sarcasm.

Do you mean try owning a derelict property and renting it out in that state?

I am a landlord and don't play the game that way, but I am also not naive to the reality that there are people who do this, and still have their properties occupied.

Part of how I avoid that is screening my tenant, I can take damage deposits, I can do regular inspections, I can keep up on maintenance and improvement spends, etc... but I never avoid the reality that any one of those tenants could totally destroy my asset and I am the one who is left to deal with it.

If I am OCD and need everything to be perfect all the time no matter what, that's a huge problem and I better have a plan.

If I am worried about maximizing rent income and/or maintaining debt service, that's a problem and I better have a plan.

If I am worried about a future sale and capturing the absolute top price for that asset, I better keep it in good shape and have a plan ready to fund that even if I never have to.

If I own the thing outright, don't need to service debt, don't give a crap about the condition of it at any given time, don't plan on ever selling it to anyone in the future for any reason... well, I'm not going to really give a darn if it is occupied, and if it's occupied if it is occupied by decent, respectful and responsible people...

Do you see where I am going with this?

I'm frustrated about it, too. Our system is not one that is structured for long term stewardship of anything, and every year that goes by, the influence of the time value of money makes that horizon of concern ever shorter.

We could have better standards on who we allow to be "tenants". We could raise rents to keep the riff raff out. We could enforce rules to discourage unwanted behaviour. We could invest in the proper upkeep of these assets, and putting them away properly. We could think about handing over the stewardship of the land we live on to future generations as the most important transaction of all to prepare for and to ensure we "maximize value" to all parties involved.

But we don't.

[SeeGeeWhy]

Originally Posted by troutman

https://joelbakan.com/the-corporation-book/

Yes, the comparison to a psychopath is apt. We all know people who treat everyone around them like absolute trash or worse, and seem to be able to get away with it as if they are immune to accountability to agreed upon rules or concern for other humans.

If corporations were people, this is the kind of person they would be. The law does not have anything to do with morality, it merely works to apply what has been written, and then strives to keep up with all the ways people test the limits of what has been written. Justice is not a morally qualified idea, it is only the application of the law as it exists. If the society is morally bankrupt, they will produce law that reflects their values. Simple as.

What is a confusing thing to me about the corporation is a person, though, is how the treatment stops short.

A corporation is a person, but you still need directors and officers to assume liabilities that can end up following them as individuals even after resignations. Why does that happen? The corporation is a person, aren't they? Shouldn't Mr or Mrs or Zir Corp put on their big person pants and deal with the messes they make?

I get that it is a simplifying reduction that makes the system itself function with slightly less friction, but it produces way too many undesirable effects for society.

The only ways I know how to deal with narcissists and psychopaths in my personal life is to avoid associating with them, or violence. "The Law" does not have the option of not associating with these people, they do have the monopoly on violence and apply it sparingly.

What other alternatives are possible?

I imagine it would require a reframing of what is important at minimum.

Defence of property rights and their associated rules around debt vs equity priorities is all anyone seems to actually care about. No wonder we have ended up with a low-trust, low-accountability, self-centred society that actively discounts the value of the future. Could that change by elevating the value of the future, or ensuring that to qualify as a person under the rules of law you must also be able to demonstrate a sense of duty and concern towards others?

I also imagine things will be very different if we did not have to work within the limits set by the invention of nation-states and their fiat currencies. Yet again... what are the alternatives?