Respec Oilfield Services Ltd. MONITOR’S THIRTEENTH REPORT January 18, 2010

Action No. 0903 06823
Bankruptcy No.: 24-115167
Respec Oilfield Services Ltd.
MONITOR’S THIRTEENTH REPORT
January 18, 2010
Action No. 0903 06823
Bankruptcy No.: 24-115167
IN THE COURT OF QUEEN’S BENCH OF ALBERTA
JUDICIAL DISTRICT OF EDMONTON
IN THE MATTER OF THE BANKRUPTCY & INSOLVENCY ACT,
R.S.C. 1985, c. B-3, AS AMENDED
AND THE COMPANIES’ CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
RESPEC OILFIELD SERVICES LTD.
(“Respec” or the “Company”)
THIRTEENTH REPORT TO THE COURT
SUBMITTED BY PRICEWATERHOUSECOOPERS INC.
IN ITS CAPACITY AS MONITOR
1.
Paragraph four of the Court Order dated December 9, 2009 (the “Order”) states that
“…the Monitor shall prepare a report on whether any, or all, of the Rewegas’,
Consultants’ or Subcontractors’ claims should be paid from monies on hand with the
Applicant prior to November 30, 2009. Such report shall set forth any concerns with the
claims and advise as to whether they are substantiated in whole or in part”.
2.
Paragraph five of the Order states that “…the Monitor shall consult with Douglas
Rewega, and Douglas Rewega shall assist the Monitor in that regard.”
3.
In accordance with the Order, we set out below our report on the claims outlined above.
REWEGAS
Total $15,405.78 – Doug Rewega $10,416.67 - Lisa Rewega $4,989.11
4.
During December 2009 and January 2010, in accordance with paragraph five of the
Order, the Monitor made numerous requests of Mr. Rewega and subsequently Mrs.
Rewega to assist the Monitor in preparing the report required by paragraph four of the
Order.
In addition, the Monitor requested the Rewegas deliver other information
previously requested by the Monitor during the CCAA proceedings as outlined in the
Monitor’s 10th and 11th Reports.
-25.
On January 8, 2010, the Monitor’s legal counsel, Mr. Rick T. G. Reeson, Q.C., wrote to
Respec’s legal counsel addressing concerns that the Monitor has not received the
requested information from Mr. Rewega. Attached as Exhibit 1 is a copy of this letter.
6.
On January 12, 2010, Mr. Michael J. McCabe, Q.C. (the Company’s legal counsel)
organized a conference call between the Monitor and Mr. Rewega (the “Conference
Call”) to address the issues outlined in Mr. Reeson’s letter.
7.
During the Conference Call, the Monitor reviewed the outstanding requests for
information as set out below:
(i)
Financial records (ie. invoices, field tickets etc.) relating to the $912,000
accounts receivable (the “Lagoon Project”);
8.
(ii)
Receipts for $10,000 advance to Mr. Rewega;
(iii)
Proof of ownership of equipment removed from Ritchie Bros. auction;
(iv)
Real estate binders for real property owned by Respec;
Attached as Exhibit 2 are emails dated January 13, 2010 addressed to Mr. Rewega
summarizing the discussions relating to the Conference Call.
9.
Mr. Rewega confirmed the information set out above is in his possession and he advised
that he would make information available to Ms. Grace (who is assisting the
Monitor/Receiver).
10.
On January 18, 2010, Mr. Rewega advised the Monitor that the financial records for the
Lagoon Project receivable and the real estate binders will be made available to Ms. Grace
on January 19, 2010.
Monitor’s Position on Payment to the Rewegas
11.
To date, the only information provided by the Rewegas in relation to the Lagoon Project
is a letter addressed to the MDO by Genivar dated November 24, 2009 (the “Genivar
Letter”) and includes certain invoices issued by the Company. This letter was provided
to the Monitor by Mrs. Rewega on January 6, 2009. Attached as Exhibit 3 is a copy of
the Genivar Letter.
-312.
The Monitor reviewed the invoices attached to the Genivar Letter with Ms. Grace and she
advises that several of these invoices were not generated by her and, accordingly, these
invoices are not reflected in the Company’s accounting records. Ms. Grace advised the
Monitor that she generated all invoices for the Company. As these invoices are not
reflected in the Company’s accounting records and Ms. Grace was not made aware of
their existence by management, the Monitor is reviewing all information with respect to
the generation of these invoices.
13.
The Monitor is in discussions with the MDO and Genivar relating to the Lagoon Project
receivable and has requested copies of all invoices issued by Respec in their possession
and proof of payments by the MDO on these invoices.
14.
Until such time as the Rewegas deliver all the outstanding information noted in
paragraphs 7(i) to 7(iv) above and the Monitor has thoroughly reviewed the
circumstances surrounding the Lagoon Project receivable, the Monitor recommends that
the Rewegas not be paid their outstanding wages at this time.
CONSULTANTS
Domvile & Associates - $3,750
15.
On December 10, 2009, the Monitor requested from Mr. Rewega background information
relating to the services provided by Domvile & Associates to Respec and the outstanding
wages due for the period November 14, 2009 to November 27, 2009.
16.
As outlined in the Monitor’s Twelfth Report, Respec advised the Monitor that Domvile &
Associates was a consultant hired by Respec to source projects.
17.
It appears Mr. Domvile and his company are based in Vancouver, BC.
18.
On December 24, 2009, Mr. Rewega advised the following with respect to Domvile &
Associates:
(i)
Mr. Barry Domvile of Domvile & Associates has been employed by Respec
on and off for a period of two years;
(ii)
Mr. Domvile’s role was to find an investor or a purchaser of Respec as a
going concern;
-4(iii)
Mr. Domvile arranged numerous conference calls and meetings with
interested parties and worked closely with Allegiance Capital (Dallas) with
respect to the proposed sale of Respec;
(iv)
Mr. Domvile was hired as an employee instead of a consultant in order to
reduce costs for Respec and that all applicable payroll taxes have been
deducted from his wages;
(v)
19.
There is no employment contract for Mr. Domvile;
During the Conference Call, Mr. Rewega advised that he was no longer taking the
position that the consultants are to be paid.
20.
The Monitor has left a voicemail message for Mr. Domvile to discuss his employment
with the Company. As of the date of this report, the Monitor has not heard from Mr.
Domvile.
Mahut Kadir - $6,380
21.
On December 10, 2009, the Monitor requested from Mr. Rewega background information
relating to the services provided by Mr. Mahut Kadir to Respec and the outstanding
wages due for the period November 14, 2009 to November 27, 2009.
22.
As outlined in the Monitor’s Twelfth Report, Respec advised the Monitor that Mr. Kadir
was a consultant hired by Respec to source projects overseas, which we understand to be
in relation to Mr. Rewega’s efforts in Kurdistan. We are unaware of any projects
awarded to Respec or revenues generated overseas by the Company.
23.
During the period October 28, 2009 to November 4, 2009, Mr. Rewega travelled to
Kurdistan to pursue a potential going concern sale of Respec.
24.
Upon Mr. Rewega’s return on or about November 5, 2009, the Monitor was advised that
there would not be a going concern sale of Respec.
25.
During the Conference Call, Mr. Rewega advised that he was no longer taking the
position that the consultants are to be paid. Accordingly, he advised that he would not
provide the Monitor with Mr. Kadir’s contact information.
-5Monitor’s Position on Domvile & Kadir
26.
The Monitor is of the view that Mr. Domvile and Mr. Kadir should not be paid for the
following reasons:
(i)
The October 8, 2009 Order directs that Respec shall terminate “all nonessential employees under the supervision of the Monitor”.
(ii)
Mr. Domvile was hired by Respec to source projects and/or to assist in a
going concern sale of Respec.
(iii)
Mr. Kadir was hired by Respec to source project overseas in relation to
Kuridstan.
(iv)
Since Respec was not to take on any new projects and the fact that neither
party was able to affect a going concern sale, Mr. Domvile and Mr. Kadir
should not be paid for the period November 14, 2009 to November 27, 2009.
(v)
The Receiver has notified Mr. Domvile and Mr. Kadir that they may be
eligible to file claims under the Wage Earner Protection Program.
27.
As discussed above, Mr. Rewega advised that he was no longer taking the position that
these consultants are to be paid.
SUBCONTRACTORS
K & N Contracting (743091 Alberta Ltd.) - $28,560
28.
We have reviewed K & N Contracting’s (“K & N”) invoice dated November 28, 2009
and discussed the work performed by K & N with Ms. Grace. Attached as Exhibit 4 is a
copy of this invoice.
29.
The invoice appears to reflect three services performed by K & N, being supervision of
the moving of equipment, hauling Respec equipment to Grande Prairie and rental charges
relating to a mini excavator.
-6Monitor’s Position on K & N
30.
The Monitor has requested further information and Ms. Grace is in the process of
compiling this information for the Monitor. Accordingly, at this time the Monitor
recommends that this invoice not be paid until the Monitor is provided information to
verify that the work was duly performed and that the charges are reasonable.
Silverline Contracting Ltd. – $12,522.42
31.
We have reviewed Silverline Contracting Ltd. (“Silverline”) invoices and discussed the
work performed with Ms. Grace. Attached as Exhibit 5 are copies of these invoices.
32.
The services provided relate to supervision of the moving of equipment to Grande Prairie,
and other miscellaneous charges (meals, swamper etc.).
Monitor’s Position on Silverline
33.
The Monitor is of the view that the work appears to have been duly performed and the
charges are reasonable. Accordingly, Silverline should be paid. As these charges relate
to the transportation of equipment, these costs will be allocated to the various PMSI
creditors on a pro rata basis.
Mike Fedelleck (861178 Alberta Ltd.) - $22,023.75
34.
We have reviewed Mr. Mike Fedelleck’s invoices and discussed the work performed with
Ms. Grace. Attached as Exhibit 6 are copies of these invoices.
35.
These invoices are in relation to work performed by Mr. Fedelleck for Respec on the 19
lot subdivision project during the period October 16, 2009 to November 22, 2009.
36.
Respec has invoiced the MDO for the work performed by Mr. Fedelleck for the period
October 16, 2009 to November 22, 2009.
Monitor’s Position on Mike Fedelleck
37.
The Monitor is concerned about the collectability of the 19 lot subdivision receivable due
from the MDO.
-738.
Accordingly, the Monitor is of the view that Mr. Fedelleck should be paid when the 19
lot subdivision receivable due from the MDO is collected. In the event this receivable is
not collected, Mr. Fedelleck should not be paid.
39.
The Monitor is currently in discussions with the MDO regarding this outstanding
receivable, which is estimated to be approximately $130,000 as at January 18, 2010.
OTHER MATTERS
Use of Transportation Companies - Background
40.
We provide a summary of events that sets out Respec’s use of contractors to transport its
equipment to Grande Prairie.
41.
As outlined in paragraphs four through fourteen of the Monitor’s 11th Report dated
November 25, 2009, the Monitor advised the court that the Monitor had concerns over
the Company’s use of contractors to move the equipment, as the Monitor was previously
advised that the Company would be utilizing its own employees and equipment at
substantial savings to the creditors (ie. costs of $900 - $1,000 per load).
42.
As noted in the Monitor’s 11th Report, on the afternoon of November 17, 2009, the
Company forwarded an email to the Monitor advising that it would be issuing cheques to
two companies assisting Respec with the moving of equipment to Grande Prairie. The
cheques issued were to Duffy Enterprises Ltd. (“Duffy”) in the amount of $51,200.00 and
Black Stallion Ventures (“Black Stallion”) in the amount of $5,864.25.
43.
Prior to November 17, 2009, the Monitor was not advised that Respec was utilizing third
party transportation companies.
44.
On November 17, 2009 the Monitor sent an email to the Company questioning the use of
contractor to haul equipment, attached as Exhibit 7, as set out below:
“In light of the fact Duffy’s is a creditor of Respec (owed more than $400,000)
we are required to scrutinize these charges attached to your email to ensure they
are reasonable, were duly performed and that the charges do not represent
Duffy’s trying to “recoup” some of the pre-CCAA debt.
-8Also, Doug indicated to PwC that Respec could haul the equipment of
approximately $900 per trip. The charges to haul equipment as attached, along
with employee a high payroll for November 1 – 14 require a more detailed
explanation given Doug’s estimates. You will note in my previous emails that I
was concerned about the payroll figures in relation to sales.
The charges
attached only raises my concerns.
A few questions:
•
Why did Respec utilize contractors instead of its employees?.......”
[emphasis added]
45.
On November 18, 2009, Mrs. Rewega contacted the Monitor by telephone and responded
by saying these transportation companies have to be paid.
46.
Mrs. Rewega advised that Respec was working around the clock to ensure the equipment
arrived at Ritchie Bros and, accordingly, the cheques for Duffy and Black Stallion must
be processed to ensure the equipment arrives on time. Mrs. Rewega advised that these
companies required payment immediately. Concerned that the equipment may not arrive
in time which may allow Ritchie Bros. not to honour its gross minimum guarantee, the
Monitor agreed to allow the cheques to be released, subject to a further review as to their
validity.
47.
On November 18, 2009, Ms. Grace forwarded an additional transportation invoice from
another company, 1130091 Alberta Ltd. (“113”).
48.
Attached as Exhibit 8 is a copy of the invoice from 113 in the amount of $20,160.00
which reflects 96 hours of transport time.
49.
At 12:09pm on November 18, 2009, the Monitor responded to Ms. Grace’s email as
follows:
“I’m good with the other two but this one (113) is very generic. Where is the
backup on what they moved and how many hours they incurred per trip? I
also don’t like the fact they indicated they will release the list of equipment
they moved upon receipt of payment. It doesn’t work that way. I need
backup. If they have an issue they should contact me.
Here is another list of questions.
-9•
Who is 1130091 Alberta Ltd? and why is there not a GST number on the
invoice”
50.
Attached as Exhibit 9 is a copy of this email.
51.
As of the date of this report, the Monitor has not received a response from the Company
with respect to 113 and, accordingly, this amount has not been paid.
52.
At 2:43pm on November 18, 2009, the Monitor sent an email raising concerns of the
higher than anticipated payroll and the use of transportation companies. Attached as
Exhibit 10 is a copy of this email to Canadian Western Bank (“CWB”) with a copy to
Lisa Rewega, Doug Rewega and Mary Grace, which we summarize below:
“…The Monitor has raised concerns over the higher than anticipated payroll
figure and requested the Company provide a breakdown of the payroll (work
performed on projects vs. transportation of equipment). We are advised that this
documentation will not be forthcoming at this time as Respec is working around
the clock to attend to the transportation of equipment from Red Earth to Grande
Prairie; however, we have been assured that a schedule will be provided.
In addition, the Monitor was recently advised by Respec that it engaged certain
contractors to assist in the transporting of equipment. Over the last two days,
we have received copies of invoices totalling approximately $75,000 for work
performed by these contractors. We have reviewed the hours and rates charged
by these contractors, contacted other companies in the industry and confirm
that the charges appear reasonable (subject to confirmation of the equipment
that was moved). [emphasis added]
As you are aware, the Company was of the view that the equipment could be
transported utilizing its own employees and equipment at a significant savings
to the lessors and other stakeholders. Given the amount of equipment, logistical
issues that have arisen and the use of contractors, it appears the Company will
be unable to realize the anticipated savings. We confirm that all costs to move
the equipment will be allocated to each lessors equipment as would be the case if
Ritchie's moved the equipment. [emphasis added]
While there are outstanding questions surrounding the payroll figures, the
Monitor is of the view that the focus of the Company should be on ensure the
- 10 equipment is delivered to Ritchie Bros. in time for the auction. Payroll should
be processed at this time and a further review of the payroll can occur once the
transportation is completed.”
53.
The purpose of the email was to advise CWB of the additional costs being incurred by
Respec to transport the equipment to Ritchie Bros.
54.
As set out above, November 17, 2009 was the first date when the Monitor became aware
that Respec was using third party transportation companies to move its equipment.
55.
Prior to the appointment of the Receiver on November 30, 2009, the Company did not
dispute the Monitor’s confirmation that the Monitor first became aware of the use of third
party transportation companies on November 17, 2009.
1130091 Alberta Ltd. - $20,160.00
56.
As discussed above, the invoice issued by 113 raised concerns with the Monitor as to the
validity of the invoice. During December 2009 and January 2010, the Monitor requested
Mr. Rewega’s assistance in order to ascertain the validity of these charges including
requests for Mr. Rewega to contact 113 or to provide 113’s contact information to the
Monitor. These requests were reiterated in Mr. Reeson’s letter of January 8, 2010.
57.
During the Conference Call, Mr. Rewega advised that he was no longer taking the
position that the transportation companies are to be paid. Accordingly, he advised that he
would not contact 113 or provide the Monitor with the contact information for 113.
58.
Prior to the Conference Call, on January 11, 2010 Ms. Grace delivered a letter to 113’s
post office box in Rainbow Lake requesting 113 to provide a listing of the specific
equipment moved by 113 and the cost associated with each. Attached as Exhibit 11 is a
copy of this letter.
59.
As at the date of this report, we have yet to receive a response from 113.
60.
From searches conducted at Land Titles, Ms. Grace advised the Monitor that Duffy
operates at a location owned by 113.
61.
The Monitor notes that no representatives from 113 have contacted the Monitor at any
time subsequent to the equipment being delivered to Ritchie Bros. to inquire about the
status of payment of 113’s outstanding invoice.
- 11 Monitor’s Position on 1130091 Alberta Ltd.
62.
As a result of the foregoing, we propose that 113’s invoice not be paid as the Monitor has
not been provided with any information to determine the validity of this invoice.
Duffy Enterprises and Black Stallion – no amounts outstanding
63.
As outlined above, Duffy and Black Stallion have been paid in full.
64.
During December 2009 and January 2010, the Monitor requested Mr. Rewega’s
assistance in contacting Duffy and Black Stallion in order to ascertain the specifics of the
equipment that Duffy and Black Stallion moved in order that the Monitor could properly
allocate these charges to the various PSMI creditors’ equipment.
65.
On January 4, 2010, the Monitor forwarded letters to Duffy and Black Stallion requesting
information relating to the moving of equipment. Attached as Exhibit 12 are copies of
these letters.
66.
As at January 8, 2010, no assistance was provided by Mr. Rewega as outlined in Mr.
Reeson’s letter (Exhibit 1).
67.
On January 9, 2010, Duffy responded to the Monitor by fax advising he did not have the
information requested by the Monitor. The Monitor has not yet received a response from
Black Stallion.
68.
The Monitor will pursue obtaining the required information from Duffy and Black
Stallion in order that the Monitor properly allocate costs to the various PMSI creditors’
equipment and if appropriate responses are not provided, the Monitor may have to apply
to court for assistance in obtaining the required information.
The Monitor respectfully submits to the court this, its Thirteenth Report.
Dated this 18th day of January 2010.
PricewaterhouseCoopers Inc.
In its capacity as Monitor of
Respec Oilfield Services Ltd.
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
Exhibit 6
Exhibit 7
Exhibit 8
Exhibit 9
Exhibit 10
Exhibit 11
Exhibit 12
- 12 Action No. 0903 06823
Bankruptcy No.: 24-115167
IN THE COURT OF QUEEN'S BENCH OF ALBERTA
JUDICIAL DISTRICT OF EDMONTON
IN THE MATTER OF THE BANKRUPTCY & INSOLVENCY
ACT,
R.S.C. 1985, c. B-3, AS AMENDED
AND THE COMPANIES’ CREDITORS ARRANGEMENT
ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE
OR ARRANGEMENT OF RESPEC OILFIELD SERVICES
LTD.
THIRTEENTH REPORT OF THE MONITOR
PRICEWATERHOUSECOOPERS INC.
1501 Toronto Dominion Tower
10088 – 102 Avenue
Edmonton, AB, T5J 3N5
Telephone: 780.441.6700