Canadian Superior said late last week that it plans to fight the recently-filed class action lawsuits, which charge that the company and its management issued a number of “materially false and misleading statements” about its El Paso Mariner I-85 well from Nov. 17, 2003 to March 11, 2004. The suit charges the defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The well is located in the Atlantic Ocean off Nova Scotia.
The company reported two weeks ago that despite encountering gas pay in multiple zones on its Mariner I-85 well, it had halted and abandoned drilling on the deepwater prospect because of pack ice and potential cost overruns. On this news, shares of Canadian Superior skidded 44.44%, or $1.44 per share, to close at $1.80 per share on March 11 on heavy volume of 14.9 million shares. In Friday trading (March 19), the company’s shares climbed 2 cents to close at $1.33.
The suits brought against Canadian Superior, Greg Noval, president, and Michael Coolen, director of East Coast Operations, alleges that “positive statements” issued by Canadian Superior failed to disclose and indicate:
Taking things one step further, Abbey Gardy LLP’s suit charges that “while in possession of materially adverse information, defendant Noval sold 25% of his Canadian Superior stock at artificially inflated prices.” Calls to the company went unreturned.
In addition to holding a conference call last Monday, Canadian Superior released a statement Wednesday in an attempt to allay concerns. “Canadian Superior views these allegations to be groundless, frivolous and a misuse of the United States legal system,” the company said. “Canadian Superior intends to vigorously and aggressively deal with this matter in court.
“It is Canadian Superior’s opinion that these actions amount to jockeying by various United States legal counsel to determine who, if any, will represent a plaintiff, if one exists, against Canadian Superior. Canadian Superior views these actions as regrettable and detrimental to its shareholders and accordingly these actions will be aggressively dealt with in court.”
During the call last Monday, the company said the abandonment of the El Paso Mariner I-85 well following 3-1/2 months of drilling was not out of the ordinary when dealing with a new prospect. Following the hour-long call, management did not take any questions.
“Canadian Superior’s technical staff recommended to management to carry on and do the drill stem testing of this particular well,” Coolen said during the call. “That same technical recommendation was made by our joint venture partner to their management.
“Although we at Canadian Superior certainly endorsed the recommendation and approved to carry on with the drill stem testing, in this case, our joint venture partner did not accept the recommendation from their technical team and chose to put us on notice so that any drill stem testing or any additional work on the well would be 100% to our account if we did not accept the operator’s decision not to drill stem test and plug and abandon the well.”
Although Canadian Superior said blame should not be put on El Paso, the company said it “was caught by surprise” by decisions being made by El Paso, which were likely coming out of its Houston office. “I don’t think that there was any doubt that if we had a test of this well we would have got gas, it was just a matter of quantity,” Noval said on the call. “That was a several million dollar issue, and quite frankly being a small company, we couldn’t afford the risk of taking on the additional costs at this juncture in our corporate career.”
Noval said some of the negative response the company has gotten from analysts has come from “some of the people in the peanut gallery, where it’s really easy to have somebody stick a mike in your face and give a quick quote without thinking or knowing exactly what is happening, or what has happened with this particular well.”
Sticking to the positive, the company said well logs have proved there was gas on its Mariner block, giving it confidence that a gas pool sits between the now abandoned Mariner I-85 and the Arcadia J-16 wells, drilled nearby two decades ago by ExxonMobil Corp.
Feeling rooked by Canadian Superior’s announcement that it had halted operations at the Mariner I-85 well, a number of class action lawsuits have been filed in the United States District Court for the Southern District of New York on behalf of purchasers of the securities of Canadian Superior Energy Inc.
Following its own investigation, Scott + Scott LLC joined the class action fray on Thursday, which already includes the firms of Abbey Gardy LLP, Cauley Geller Bowman & Rudman LLP, Schiffrin & Barroway LLP and the Law Offices Of Charles J. Piven.
Canadian Superior is a Calgary-based oil and gas exploration and production company has operations in western Canada, offshore Nova Scotia and offshore Trinidad. The company is one of the largest acreage holders offshore Nova Scotia, with interests in 1,293,946 acres.
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