A British company has started foreclosure proceedings against the assets of Richfield Oil and Gas Co. for failing to repay a loan that was overdue by one day.
Nostra Terra Oil and Gas CEO Matt Lofgren on Thursday refused to explain why his company moved so soon against Salt Lake City-based Richfield, saying only that "not much" was disclosed by Nostra Terra about the foreclosure it initiated Feb. 1.
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Douglas Hewitt, Richfield’s CEO, said his oil and gas exploration company does not understand why Nostra Terra immediately initiated foreclosure proceedings against Richfield. He hinted that Nostra Terra may have had a motive other than to recoup a $1.3 million loan it made to Richfield last April.
"We have our suspicions," Hewitt said, adding that Richfield attempted to comply with terms of the loan, but Nostra Terra failed to respond. "We think it was a strategic move for them."
The loan matured on Dec. 31. A week later, Nostra Terra granted Richfield an extension that would expire Jan. 31. The loan was secured by oil and gas leases in Kansas and Utah.
The lease in central Kansas includes exploratory wells that Richfield says may be capable of producing 50 barrels of crude oil a day from the Arbuckle formation, which has yielded 1.6 billion barrels since the 1920s, according to the company’s website. Richfield controls 33 wells in the area, including 9 producing wells, according to a company document on file at the Securities and Exchange Commission.
In a statement, Nostra Terra said it is in the process of assuming "temporary control" of the Kansas leases. It said that Richfield agreed to waive all its rights to the leases in return for the one-month loan extension, if foreclosure proceedings were ever launched.
The statement does not mention Nostra Terra’s plans for Richfield’s Utah leases. The company is the operator and majority owner of about 14,000 acres on the Sanpete-Sevier Overthrust Tend in central Utah. The land is near a field discovered in 2003 by Wolverine Gas and & Oil that reportedly contains an estimated 150 million barrels. Richfield is also exploring for oil in Juab County.
Richfield was incorporated last year. In December, the company filed a document with the SEC seeking permission to sell stock to the public. In the document, Richfield said it lost $7.3 million in the first nine months of 2011 on revenue of $580,470. The loss was greater than during the same period of 2010, when Richfield’s red ink was $6 million on revenue of $448,484.
Elsewhere in the document, Richfield said its independent auditor, after reviewing the company’s financial statements for 2009 and 2010, expressed "doubt" about the Richfield’s ability to continue as a going concern. The auditor cited substantial losses from operations, lack of capital and other reasons.
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