After being bailed out by Alaska’s state government, North Slope oil field is eyed for sale

Alaska’s state-owned development bank is planning to sell a troubled North Slope oil field development that previously received a state bailout loan.

At a regularly scheduled meeting Sept. 21, the board of the Alaska Industrial Development and Export Authority agreed to open final negotiations for the sale of Mustang Holdings LLC to the subsidiary of a privately owned Texas oil firm.

The board voted unanimously to give AIDEA CEO Randy Ruaro 30 days to close a deal with Finnex Operating LLC, a firm wholly owned by Thyssen Petroleum USA through an Alaska intermediary.

The term sheet for the proposed sale was not disclosed during the meeting, and officials with the corporation said on Friday that they were unable to provide financial figures.

AIDEA has owned the Mustang oil field, formally part of the Southern Miluveach Unit, since 2021, when the state-owned investment bank foreclosed on owners who had failed to repay an AIDEA loan.

The field is estimated to contain more than 25 million barrels of oil and is located between two highly productive fields owned by ConocoPhillips.

It has the potential to generate millions in revenue for its owners and millions in tax revenue for the state treasury, but that’s still hypothetical.

Before the foreclosure, AIDEA spent $72 million developing the oil field and supporting infrastructure, not counting a special $22.5 million bridge loan from the Alaska Department of Revenue.

Budget documents show the investment bank has spent additional money since then to maintain the project, with little to show for it. Earlier this year, AIDEA gave part of the project to the state in order to reduce the annual cash dividend it pays the state treasury.

AIDEA CEO Ruaro said during last week’s meeting that its pending deal with Finnex is protected by a letter of credit, “so we will get payment regardless of what happens with their progress in developing the field,” he told board members.

Rick Fox is president of Fairweather LLC, a small oil and gas support firm caught up in the foreclosure. His firm accepted 30 cents on the dollar to settle debts associated with the Mustang project, he told board members, and he supports the sale.

“We have the expectation that Finnex will follow through with their plans and we will get a chance to put our people to work again on this project,” Fox said.

He later added: “I believe it is in the best interest of the state of Alaska for AIDEA to transfer the Mustang field to Finnex.”

Three days before AIDEA’s board voted to go ahead with the sale, Doyon Limited — Interior Alaska’s regional Native corporation — sued AIDEA to recoup more than $2 million in outstanding debts related to the project.

Through its attorney, the company declined additional comment on Friday.

A public notice first reported by Petroleum News in February indicates AIDEA officials have been negotiating the deal for some time.

It isn’t the first time Finnex has expressed interest in the project. In 2020, after the project’s former owner, Singapore-based Caracol Petroleum, failed to make payments on an AIDEA loan, Finnex appeared ready to take over the project.

That never happened, and AIDEA foreclosed on the project, leaving it in the hands of its subsidiary, Mustang Holdings LLC.

“AIDEA basically got screwed to take this thing,” said Bernie Karl, a former AIDEA board member who spoke at last week’s meeting. “It was a bad deal. You didn’t just one day decide you were going to buy it. You got screwed, blued and tattooed on the deal. So now you’ve got a chance to get out of this.”

Gordon Pospisil, president and CEO of Finnex LLC, said that after the purchase, his firm will submit a plan of development to the Alaska Department of Natural Resources.

He said he anticipates a phased development that will reconnect the oil field to an export pipeline and eventually drill new oil wells for more production.

“If we are at full success, this would provide for, we estimate, 120 construction (jobs) and then 10 to 20 jobs that would be permanent,” he said.

Before the final vote, board member Albert Fogle was among those who praised the sale’s potential.

“I think this is a good deal for everyone, especially Alaska employers and Alaska residents as well, to get this field back into production,” he said.

Originally published by the Alaska Beacon, an independent, nonpartisan news organization that covers Alaska state government.