Calgary-based producer Canadian Superior last week said it will pay US$3.2 million to settle all class action lawsuits in the United States over its Mariner I-85 exploration well offshore Nova Scotia.
The settlement is covered by the company's insurance, and it was reached with no admission of liability by any party and "entered into to avoid costly and time consuming litigation by all parties," Canadian Superior said in a statement. All of the parties also agreed to "expeditiously seek the required U.S. court approval of the settlement."
Canadian Superior and El Paso Corp. first began working together to drill offshore Nova Scotia in late 2002 (NGI, May 22, 2002). At the time, Canadian Superior, which purchased the Mariner block for about C$15 million in 2001, initiated a 2,200-kilometer high resolution seismic program with El Paso Oil & Gas Canada Inc. on the prospect, and it spent C$3.5 million on a seismic program. The Mariner prospect was believed to hold more than 1 Tcf of gas.
Under a farm-in agreement, El Paso Oil and Gas agreed to pay a proportionate percentage of the costs for seismic, drilling and completion activities in exchange for an interest in Mariner. The Mariner well was one of the deepest wells to be drilled in Canada at the time in 2003, with the depth reaching 19,685 feet at an estimated cost of C$60 million when completed.
However, the deal began to sour after drilling turned up several dry holes in 2003 and early 2004 (see NGI, ). Canadian Superior said then that high drilling costs and ice pack delays had temporarily halted drilling, and a few days later, several class action lawsuits were filed in the U.S. District Court for the Southern District of New York on behalf of Canadian Superior shareholders (see NGI, March 22, 2004).
The lawsuits alleged that Canadian Superior President Greg Noval and Michael Coolen, director of East Coast Operations, had issued several "materially false and misleading statements" about the Mariner prospect between Nov. 17, 2003 and March 11, 2004. Among other things, the lawsuits alleged that the positive statements failed to disclose that Mariner's I-85 well was virtually dry and that actual costs significantly exceeded the budget.
Canadian Superior announced that it was abandoning the Mariner I-85 well by the end of March 2004. It bought out El Paso's stake last September, but it also announced that it would begin exploration on a second well in the Mariner block (see NGI, Sept. 20, 2004)
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