Kleiner Perkins Oil/Gas Exploration Startup on the Ropes?

An oil and gas exploration startup backed by VC heavyweight Kleiner Perkins Caufield & Byers may be on the verge of going belly-up, according to a report from PEHub.

Terralliance, which raised $295 from Kleiner and other investors to back its oil and gas exploration software development, is reported to have fired its founding CEO and four-fifths of its staff and closed offices as it seeks to restructure a sizable debt load.

PEHub reports that Kleiner Perkins — which has emerged as a prominent investor in greentech companies of late — invested $10 million in Terralliance in 2004, another $35 million in 2005 and then a piece of a $250 million round in 2006. Other investors in the 2006 round included Goldman Sachs, DAG Ventures and Dubai-based Ithmar, PEHub reported.

But since then the company fired founding CEO Erland Olson, who was described as spending like a “drunken sailor” by sources quoted by PEHub, after investors were shocked by a recent audit.

The Newport Beach, Calif.-based company claims on its Web site — which otherwise lacks any details or contact information — that its technology has “already achieved exploration success rates dramatically above the industry norm.”

Terralliance is not listed at Kleiner Perkins’ Web site’s list of portfolio companies, but is noted on the Web page of partner Joseph Lacob as a company that has received investment from the firm.

Fortune magazine quoted Lacob in 2008 as saying that Terralliance planned to use its software to drill for oil and gas itself. The company had drilled about 100 wells around the world and was looking for $1 billion in new financing at the time, Lacob told Fortune.