Canadian Superior Calls Rival's Delay Unnecessary
In a week marked by dealing and squealing on each side, Canadian Superior Energy Inc. said last week that Canadian 88's decision to "arbitrarily postpone" a special shareholders' meeting to vote on a takeover bid proposed by Canadian Superior was imposing an "unnecessary delay on its own shareholders" and was continuing to "fail to provide shareholders with an alternative transaction, or even to indicate a going forward strategy for the company."
In May, Canadian 88 rejected a hostile takeover bid from Canadian Superior Energy Inc. after stockholder Duke Energy, which owns 20% of Canadian 88 shares, said it did not support the proposal (see NGI, May 14). Canadian Superior, begun by Canadian 88 founder Greg Noval, is less than one-tenth the size of Canadian 88, but nevertheless, it launched its takeover in April. Noval resigned from Canadian 88 last year, but still owns stock in the company.
Calgary-based Canadian 88 had scheduled a shareholder meeting for July 12, but said it would postpone it because it had not yet received any information from Canadian Superior and was therefore unable to review its offer. Canadian Superior CEO Norval owns more than 5% of his rival's stock and is a director, and had requisitioned the shareholder meeting.
Canadian 88 said it would announce a new date for the requisitioned special meeting once it receives the "required information." It expects a delay of least a week.
"We interpret this delay to mean that the Canadian 88 board and Duke [Energy] continue to be unable to develop any proposal that can compete with Canadian Superior's offer, and have elected to buy still more time," said Richard Watkins, Canadian Superior's vice president of corporate development. "No matter how long Canadian 88 delays, we are confident that ultimately, shareholders will see our proposal as the best option available."
Last week, Canadian Superior sold its 10% interest in its Waterton area assets in the foothills of southwest Alberta to Hunt Oil Co. of Canada for C$18 million. The assets averaged approximately 2.5 MMcf/d in the past year and include a 10% working interest in 50,000 gross acres of undeveloped land.
"The non-operated production and non-operated lands being sold by Canadian Superior are non-core assets, and they are being sold to Hunt for top dollar," said Watkins. He said the sale's proceeds would be used for funding drilling this year on its Marquis blocks located on the Scotian Shelf offshore Nova Scotia.
Earlier this year, Canadian 88 entered into an agreement with Hunt to sell its Waterton area assets, including its 90% jointly held interests with Canadian Superior, and Canadian 88's 100% interest in its C$33 million Waterton area regional sour gas gathering pipeline to Hunt for C$112 million (see NGI, March 5).
In a statement clearly designed to appeal to Canadian 88 shareholders, Watkins said last week that "Canadian Superior's asset sale to Hunt recognizes the true value of the combined Waterton assets, which are estimated at over C$200 million. Canadian Superior has always maintained that Canadian 88 didn't get full value when it sold off its Waterton assets. In Canadian Superior's opinion, the Canadian Superior transaction reflects the undervalued nature of Canadian 88's entire asset base and a severe management problem at Canadian 88 related to the inability of Canadian 88's Duke [Energy] appointed senior management and Duke controlled board of directors to properly enhance Canadian 88 shareholder value."
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