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Anadarko: Bankrupt Marketer Gambled with Customers' Money

Anadarko: Bankrupt Marketer Gambled with Customers' Money

As Kansas City, MO-based Mountain Energy Corp. was forced into bankruptcy and its assets seized last week, more allegations were emerging that the gas marketer spent millions of dollars of company funds on stock in a five-year-old e-business company whose value has nose-dived over the past year.

In papers filed in a federal bankruptcy court in Missouri, Anadarko Energy Services Co., which paid the marketer $8.7 million for 3 Bcf of storage gas that it has yet to see, claimed "a part or all of the funds" that it gave Mountain Energy "were used to purchase speculative stock in Sagent Technology, a dot.com start-up trading on the NASDAQ stock exchange."

Mountain Energy bought the stock in Sagent Technology at "approximately $40 per share," Anadarko Energy said, adding that it "currently trades in the range of $3 to $5 per share." Stock in Sagent Technology, which is based in Mountain View, CA, was listed at 3 3/16 at mid-day Friday.

Moreover, Anadarko Energy said that based on a "brief on-site audit" of a facility that was to have been storing the 3 Bcf of gas it purchased from Mountain Energy, it now believes the marketer may have sold the same gas to multiple parties.

In addition to the $8.7 million, Anadarko Energy said Mountain Energy owes it about $23.2 million for gas that it delivered to the marketer last summer. Mountain Energy has "failed and refused" to pay for the gas, it noted.

In the U.S. Bankruptcy Court for the Western District of Missouri, Mountain Energy filed a consent order last week in which it agreed not to contest efforts by creditors to force it into Chapter 7 bankruptcy.

The company took this action last Monday just prior to a scheduled hearing in which Bankruptcy Judge Frank Koger was to have ruled on whether to grant a petition by creditors for involuntary bankruptcy.

Four companies --- TransCanada Energy Marketing USA, Tenaska Marketing Ventures, Farmland Industries and DuCoa LP --- brought the petition in the Missouri bankruptcy court last month, claiming they lost $24.6 million as a result of their business dealings with the marketer (See NGI, Oct. 30, 2000).

By filing the consent order, Mountain Energy essentially has agreed to dissolve its business. All telephone calls to the marketer last week went unanswered. The court appointed Steven C. Block, a Kansas City attorney, as interim trustee. He was ordered to "immediately collect and take possession of the property of the estate" and all other assets, which then will be liquidated to pay creditors. Creditors' claims against Mountain Energy are estimated to be in the neighborhood of $70-$75 million.

Mountain Energy agreed to liquidate its business because the other option --- re-organizing its troubled company and seeking court protection --- wasn't very realistic for the marketer. That's because "there's really no business left at this point to reorganize since we were unable to supply gas to our customers for the month of November," Carl R. Clark, a Kansas attorney representing the marketer, told NGI.

The first meeting of the company's creditors will be held in 30-40 days.

The marketer served more than 600 industrial and commercial customers in Missouri and Kansas, as well as sold and stored gas for major gas suppliers. The first hint that something was amiss at Mountain Energy came in early October when it notified most of its large gas customers that it wouldn't be able to supply them at their contracted-for rate.

Susan Parker

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