UPDATE 2-Pacific Energy Resources files Chapter 11

Mon Mar 9, 2009 1:55pm EDT

* Lower oil prices and debt named as reason for filing

* $40 mln DIP financing secured, subject to court approval (Adds trading activity, details of bankruptcy filing)

NEW YORK, March 9 (Reuters) - Pacific Energy Resources Ltd PFE.TO filed for Chapter 11 bankruptcy protection on Monday, saying the decline in crude oil prices made it difficult to pay its debt.

The company, which has oil and gas assets in Alaska and near California, said its revenue depended on the market price for the crude oil produced at its properties, as well as the level of production.

"Due to a variety of factors, including the drastic fall in the price of crude oil in the last calendar quarter of 2008, the stress on the debtor's cash flow worsened," the company said in documents filed with the U.S. Bankruptcy court in Delaware.

In a release, the company also said debt from past acquisitions and poor capital market conditions had cut into liquidity and cash flow, making it impossible to operate its business and invest in assets to increase oil production.

Oil and gas producers have been squeezed as U.S. federal regulations force them to write down the value of assets in the wake of the 70 percent drop in oil and gas prices since July.

Many experts have said they expect the sharp decline in asset prices to set off a wave of deal-making in the energy sector as larger, cash-rich companies seek to pick up properties at a fraction of their values of even a few months ago.

SEEKING FINANCING

Pacific Energy has asked the court to approve a debtor-in-possession loan of as much as $40 million. J. Aron & Co is among the potential lenders, according to court documents.

The Long Beach, California-based company said a Chevron Corp (CVX.N) affiliate had a majority working interest and was the operator of some Pacific Energy properties in Alaska.

Pacific Energy said seven affiliated entities had also filed for Chapter 11 bankruptcy protection, including Gotland Oil Inc, Petrocal Acquisition Corp and San Pedro Bay Pipeline Co.

Pacific Energy has about 100 employees, according to court documents.

A company representative was not immediately available to comment on the outlook for jobs or any operational changes.

The case is In re Pacific Energy Resources Ltd, US Bankruptcy Court, District of Delaware, No. 09-10785. (Reporting by Chelsea Emery; Editing by Derek Caney and Lisa Von Ahn)

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