Offshore Energy Development Corp. (OEDC) faces a class action onbehalf of shareholders alleging the company misrepresented itsperformance to investors and certain officials participated ininsider trading.

The complaint says in November 1996 OEDC completed an initialpublic offering following false and misleading presentations,selling more than 4.2 million shares at $12 per share for proceedsof more than $50 million. OEDC executives are said to have inflatedthe company’s stock price to $16 per share by making misleadingstatements about the outlook for the company’s gas operations aswell as OEDC’s ability to achieve strong cash flow and earnings pershare growth during 1997 and 1998.

“Defendants represented to investors that OEDC would quadrupleit positive cash flow in fiscal 1997 alone. As late as April 1,1997, less than three weeks before defendants were forced todisclose the precariousness of OEDC’s business operations and afterthe company in desperation secretly arranged to hire investmentadvisors to sell of the company or its assets, the defendantscontinued to maintain that the company’s operations were ‘in line’with expectations and that OEDC would ‘gather momentum’ in 1997,”said Milberg Weiss, the law firm representing plaintiffs.

On April 18, 1997, the defendants “finally began to admit thatOEDC was a financial disaster.” Among disclosures were that certainwells had ceased production, the company’s South Dauphin II LimitedPartnership was facing cost overruns of 20%, and that OEDC washaving “substantial difficulties” gaining federal regulatoryapproval for wells drilled in shallow and environmentally sensitivewaters.

“Defendants further revealed that instead of the substantialcash flow and EPS gains promised by defendants, OEDC would generatehuge losses in 1997 and would, at best, break even in 1998. .[T]heprice of OEDC stock reacted accordingly, dropping by over 50% to$3.25 per share, a decline of more than 75% from its class periodhigh.”

Joe Fisher, Houston

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