On March 2, 2018, SRC filed a Notice of Intention to Make a Proposal ("NOI") pursuant to Section 50.4(1) of the Bankruptcy and Insolvency Act ("BIA") and PricewaterhouseCoopers Inc., LIT ("PwC") was named as proposal trustee.


Please see the PwC Trustee website at:

​https://www.pwc.com/ca/en/services/insolvency-assignments/sequoiaresources.html

March 23, 2018

Sequoia Resources Corp.

Sequoia Resources Corp. (SRC) is a private, majority Canadian owned and managed gas company with operations in Alberta.

March 26, 2018

On March 23, 2018, SRC made  a voluntary assignment into bankruptcy under section 49 of the BIA.  PwC has been appointed trustee of the estate of SRC.  

March 2, 2018

Emergency:  1-844-858-8038
Other Inquiries, please visit:

​​https://www.pwc.com/ca/sequoiaresources


Contact: sequoiaresourcescorp@gmail.com

Letter to Stakeholders


Sequoia Resources Corp., or SRC, was formed in October of 2016 to implement a gas asset acquisition strategy during what was thought to be the bottom of the gas price cycle.  The strategy involved acquiring gas assets, some of which were close to the end of their life-cycle, and work on reducing the operating costs of these assets, in part through the implementation of an aggressive abandonment and reclamation program that would see the restoration of the lands and inactive wells acquired from previous producers back to their original state prior to the commencement of oil and gas activities.

Generally, the completion of abandonment and reclamation activities reduces surface and mineral rental costs and other ongoing expenses, thus reducing overall operating costs.  However, up-front capital is required to complete these abandonment and reclamation activities.  SRC believed that by completing abandonments in strategic groups (i.e. on an area by area basis) and completing portions of the abandonment process in-house, SRC would be able to clean up legacy obligations more efficiently and economically than under an otherwise less structured program.  To this end, SRC created an internal abandonment and reclamation team with in-house environmental functions, guided by a seasoned and established operational team, most of whose members have had more than 20 years of experience in Alberta managing these same acquired assets.

Operations commenced on October 1, 2016 and SRC immediately began its aggressive abandonment and reclamation program.  From October 1, 2016 to December 31, 2017, SRC abandoned 150 wells and received reclamation certificates for 91 wells.

Due to its outsize focus on cleaning up environmental liabilities, SRC ranked fifth in the province of Alberta in terms of reclamation certificates received for the period October 1, 2016 to December 31, 2017.  Ahead of SRC were CNRL, Husky, Cenovus and Paramount, each major Alberta producers that are orders of magnitude larger than SRC, a small start-up.  Further, SRC did not drill any new wells or contribute to the creation of any new environmental obligations during its existence and focused all of its cash on either rehabilitating legacy assets through workover programs or the suspension, abandonment and reclamation of those assets which had completed their productive life and restoring the associated lands to their original condition, in accordance with applicable AER and environmental requirements.

SRC also implemented other cost reduction programs throughout its operations from field to head office and took advantage of the low cost of office space in Calgary to build a very low G&A, and a lean but experienced and effective team.

These strategies were successful and on target through to the end of the summer of 2017.  SRC steadily increased its production and reduced its overall environmental liabilities.

However, by the end of the summer of 2017, gas prices in Alberta began to slide.  In October, where gas had averaged $2.95/GJ over the past four years, prices collapsed to an average of $1.32/GJ  for 2017 (source for all historic prices: www.cga.ca). On certain days in October, gas traded at negative prices; producers such as SRC paid purchasers to take the gas instead of getting paid.  During the 2017/2018 winter (Nov. to Mar., inclusive), at a time when gas prices are typically higher seasonally as heating demand peaks, and where historic prices have averaged $3.07/GJ for the past four years, prices for the 2017/2018 winter were $2.04/GJ.  During the spring of 2018, gas prices and especially gas futures continued to collapse.  The 2018 summer forecast is now $1.13/GJ (source for forward prices: www.gasalberta.com as of today’s date).  Forecast pricing for 2019, 2020 and 2021 are also very significantly down from forecast pricing when SRC began operations.  Unfortunately, the turn in prices did not appear to be just a short term anomaly.  SRC, as a "dry" gas company also does not benefit from high liquids pricing as does some of its non "dry" gas competitors.

As prices continued to drop, SRC’s management investigated various options to diversify its gas exposure, to sell assets, to re-capitalize, to convert vehicle fleets to use compressed natural gas, to purchase generators and convert gas to electricity for sale to the grid.  SRC even investigated using gas to generate electricity for cryptocurrency mining.  In this environment, both purchasers of dry gas assets and refinancing providers were difficult to find.  None of the special projects had the economics or scale to make a significant enough difference, especially when factoring in the newly implemented and escalating carbon levy.

Ultimately, as a result of the low price environment, SRC could not complete its abandonment program or continue to operate without sustaining significant losses.  SRC attempted but was unsuccessful in negotiating with municipalities to reduce its tax burden for 2017 and 2018.  Municipal taxes do not scale with gas prices and so in a low price environment account for a significant portion of SRC's costs.  SRC also attempted but was unable to obtain refinancing necessary to outlast this protracted price collapse. 

As a result of these developments, on February 22, 2018 SRC met with the AER to discuss the options available to SRC for shutting down operations in a safe and orderly manner.  On notice to the AER, SRC began closing down its biggest loss centres, following a plan for the shut-in of the remaining assets.  SRC continued to meet with the AER to work collaboratively and ensure that environmental and safety concerns were addressed throughout the shut-down of operations.

SRC entered into this project believing it had a workable strategy to create a sustainable and profitable gas company through a methodical abandonment and reclamation program, with a focus on efficiency.  None of the directors were ever paid any fees or remuneration and none of the shareholders (the majority of whom are Canadian) received any dividends or return of capital.  This unfortunate outcome is not what anyone had hoped for, and should not have been the end result after the extraordinary dedication, creativity and hard work from the employees and partners of SRC over the past year and a half. 

The Board of Directors and Management Team at SRC sincerely wish to thank SRC’s employees and partners for all of their contributions.

The Sequoia Resources Corp. Board of Directors and Management