Oil Patch Insider: The cost of loose talk

“Loose lips sink ships” was a message spread on Allied propaganda posters during the Second World War to prevent unguarded talk that could be picked up by spies.

The same warning might have been heeded by a Calgary family which took advantage of an insider’s tip about an oil patch takeover and ended up paying C$140,000 in a settlement with the Alberta Securities Commission.

When Travis Hurst met an acquaintance for lunch in December 2011 he was told that an unnamed company had made an unsolicited bid for diversified oil and gas producer Connacher Oil & Gas earlier that day. Hurst promised to pay the informant identified only as “W” 25 percent of any profit he made from the insider information.

Hurst, his two brothers Bryant and Terry, and other family members bought 383,000 shares of Connacher six days before the takeover offer was disclosed, triggering a one-third jump in share values to 94 cents.

Travis Hurst paid “W” C$2,500 in January 2012.

The Hurst family members were ordered to pay a C$140,000 penalty to the Alberta Securities Commission. Travis Hurst agreed not to trade in securities or derivatives for five years, while his brothers accepted three-year bans.

The commission said it recognized that the family members accepted responsibility and acknowledged they had a previously clean record with the regulator.

For Connacher life has been difficult over the past two years. The unsolicited bid was rejected, leaving the company burdened with debt forcing it to propose a deal in February with creditors to convert C$1 billion of debt into shares, which have been trading lately as low as 4 cents.

If the deal goes through, Connacher’s annual interest payments will be reduced by C$80 million a year. Chief Executive Officer Chris Bloomer is optimistic the company will “ride out 2015” by slashing capital spending on two oil sands projects by 75 percent.

- Gary Park