An oil pump jack pumps oil in a field near Calgary, Alberta, July 21, 2014.Todd Korol/Reuters
Argent Energy Trust has filed for creditor protection after failing to meet its debt payments, ending a limited revival of the once-popular income trust model that flourished more than a decade ago.
Calgary-based Argent said on Wednesday that depressed crude oil and natural gas prices and limited access to capital markets had hampered its ability to repay its credit facility under an accelerated timeline demanded by its lenders. A strategic review had also failed to drum up buyers for its assets, the company said.
It marks a final blow to the income trust structure that a handful of Canadian oil and gas firms had sought to recreate following the demise of the model under the former Conservative government in 2006.
Argent, Parallel Energy Trust and Eagle Energy Trust were created to take advantage of a loophole in the tax code that enabled trusts to keep paying out major portions of cash flow to investors in the form of distributions, so long as it was derived from foreign assets.
But the companies struggled to win favour with investors as crude prices slumped. Parallel sought creditor protection last year, while Eagle Energy abandoned the model entirely, saying it was restructuring as a standard-issue dividend-paying corporation.
Argent's application comes after the company failed to meet certain obligations associated with its debt following a reduction in its borrowing limit to $45-million (U.S.), from $80-million previously. The company said its application was supported by its lenders.