CORRECTED-UPDATE 1-Canada's Terra Energy halts operations after bank demands payment

(Corrects to million from billion in ninth paragraph)
By Nia Williams
CALGARY, Alberta, March 21 (Reuters) - Canadian junior oil
and gas producer Terra Energy Corp TT.TO said it shut down
production, ceased operations and announced the resignation of
directors and officers on Monday, after its lender, Canadian
Western Bank, demanded full repayment of its debt.
Terra, which was producing around 3,600 barrels of oil
equivalent per day from its operations in western Alberta and
north-eastern British Columbia, said that at current low oil
prices the cost of operating was more than its revenue.
The company is the latest Canadian producer to fall victim
to the prolonged slump in global crude prices, which have
plunged by nearly two-thirds since June 2014.
Canadian Western Bank served notice on Friday demanding
repayment in full of the C$15.9 million ($12.18 million) owed by
the company by March 28.
"The company's lender has declined to provide further
financial support to Terra and there is no other means of
financing available to the company at this time," Terra said in
a statement on its website.
Canadian Western Bank has not announced a receiver to sell
Terra's assets. A source with direct knowledge of the matter
said no receiver had been appointed because Canadian Western
Bank is concerned the receivership process would not be worth
the cost to the bank.
"They are worried they will not find any (asset) purchasers
because of economic and regulatory problems," said the source,
who declined to be named because of client confidentiality.
Canadian Western Bank declined to comment on the matter.
Since September 2015, Terra has sold off around C$12 million
in oil and gas assets to help pay down debt, but the amount was
not enough to cover all its liabilities.
Terra also said the asset sales in Alberta were hampered by
the company having a liability management rating of below one -
the ratio that regulators use to assess whether a company's
revenues cover the cost of fully reclaiming all its oil wells.
Liability management ratings and oil well liabilities are
becoming an increasingly hot topic in Alberta, where lawyers
have warned buyer concerns over reclamation costs tied to
inactive wells are disrupting energy asset sales.
Terra shares were suspended from trading on the Toronto
Stock Exchange.
($1 = 1.3058 Canadian dollars)