Keely Cameron and Luke Morrison write in JWN on how to deal with "zombie corporations" in Canada's oil patch. A zombie corporation is a shorthand label that can be used to refer to a company that is insolvent but not in formal proceedings or otherwise lacks the capacity/ability to address their co-ownership obligations. In the context of an oil and gas property with multiple working interest participants (WIPs), the presence of a zombie corporation creates a number of challenges for the operator and other WIPs.
Keely and Luke include tips and tricks in their column to mitigate the risks posed by zombies WIPs:
- Review co-ownership agreements to understand the tools and mechanics available to address Zombie WIP scenarios.
- Ensure WIP records are current and regularly assess the appropriateness of your insurance policies and coverage limits.
- Keep a precise/accurate inventory of existing AFEs regarding abandonment/reclamation work.
- Follow any court proceedings commenced in relation to zombie WIPs to mitigate the risk of your claims being barred.
- Ensure that Alberta Energy Regulator records are updated regarding working interests and that records are accurately maintained to track divestures.
- Monitor AER bulletins and legislative/regulatory developments affecting WIP risk exposure.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.