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Noval comes out swinging Canadian Superior CEO ridicules analysts, insists abandoned well has gas Gary Park Petroleum News Calgary Correspondent
He lashed out at analysts as an “uniformed peanut gallery,” accusing one or two of liking to have a “mike put in their face for the press, who didn’t bother to even call us ...” But he refused to field questions from any analysts, investors or the news media during an hour-long conference call March 15.
He mounted a comprehensive argument that Canadian Superior Energy has found significant amounts of natural gas offshore Nova Scotia. But he rejected any notion of digging into the company’s balance sheet to test its first exploration well.
“We have always worked on the concept of using other people’s money,” he brashly admitted, declaring that Canadian Superior has no intention of “jeopardizing our financial position or our balance sheet.”
He is under attack for insider trading in late January, unloading a large chunk of his shares in Canadian Superior for a combined C$4.3 million and is facing class-action lawsuits. But he made no reference to the gathering storm.
It was vintage Greg Noval.
The president and chief executive officer of Canadian Superior scheduled the conference to “set the record straight” and calm the frayed nerves of investors, who have been on a roller-coaster in recent weeks after the Calgary-based junior started dropping strong hints of “significant gas shows” in its Mariner I-85 well, drilled in partnership with El Paso Oil & Gas Canada.
Releases on Jan. 16, Feb. 9 and Feb. 23 stirred hopes of a breakthrough find in Nova Scotia’s offshore and boosted Canadian Superior shares to a 52-week high of C$4.88.
That all came crashing down March 11 when Canadian Superior announced the Mariner I-85 well was being plugged and abandoned because El Paso would not share in the C$14 million cost of testing the well. Canadian Superior blames El Paso “I don’t think there was any doubt that if we had taken that test we would have got gas,” Noval said, blaming the decision on the head office of El Paso, which is more focused on selling assets to lighten a huge debt load that stood at US$22 billion last September.
In the next four trading days, Canadian Superior shares plunged close to 75 percent on the Toronto Stock Exchange, wiping about C$200 million off its market value and costing it a valued place on the Standard & Poor’s/TSX composite index.
Muddying the waters, insider trading reports from the Ontario Securities Commission show Noval and three of his private companies sold 1.14 million Canadian Superior shares at an average price of C$3.75 from Jan. 27 to 29.
Those sales were straddled by releases that described Mariner I-85 as a “high-impact” well in an area of “proven significant discoveries and existing producing fields” — referring to Nova Scotia’s Sable project that produces about 450 million cubic feet per day.
Noval ignored that issue during the conference call, although he had previously told reporters that he unloaded shares to “hedge” his bets, without knowing whether Mariner I-85 was a discovery or a dry hole. Shareholders calling law firms Stoking the fires, four U.S. law firms that specialize in class actions — Abbey Gardy and Cauley Geller Bowman & Rudman, both of New York, Scott and Scott of Connecticut and Schiffrin and Bowman of Pennsylvania — are preparing suits based on a flood of calls they have received from angry investors.
They allege that the company, Noval and Mike Coolen, the East Coast operations director, issued a number of “false and misleading statements” about Mariner I-85 that artificially inflated the stock value.
Abbey Gardy said the news releases “failed to disclose and indicate that the defendants knew or were reckless in not knowing that the Mariner I-85 well was not progressing and was virtually dry.”
Canadian Superior retaliated March 17 by dismissing the allegations as “groundless, frivolous and a misuse of the United States legal system” and said it would “vigorously and aggressively” defend itself.
Abbey Gardy also said Noval “while in possession of materially adverse information” had unloaded 25 percent of his Canadian Superior shares at “artificially inflated prices.” Company touts Nova Scotia project Unflinching in the face of heavy fire, Noval and a team of his executives used up the allocated conference call time to promote their “very exciting plans for drill off Nova Scotia,” and boost their other activities in the Drumheller region of central Alberta and Trinidad.
They also said it was the “norm” for initial exploration wells to be plugged and abandoned; that Mariner I-85 had shown “bottom hole” pressures of 15,000 to 20,000 pounds per square inch after reaching a depth of 17,740 feet and the well bore would be saved as a future producing well; that they had established the high point in a “tremendous gas field” that included ExxonMobil’s Arcadia J-16 significant discovery well drilled 20 years ago; that another well could be spudded in three to six months if a partner could be found; and that they intended to “go forward aggressively” with exploring their 1.3 million acres of Nova Scotia exploration licenses.
Brian Prokop, an analyst with Peters & Co., voiced the frustration of analysts at the Canadian Superior filibuster, telling reporters there was no “tangible evidence” that the C$40 million Mariner well had hit pay dirt and no chance for the “peanut gallery” to do what Noval had accused it of failing to do — ask questions. Noval has legend as lone ranger The conference call added another chapter to the Noval legend as a lone-ranger in the Canadian oil patch.
He built Canadian 88 Energy during the 1990s from a C$200,000 start-up to a C$60 million company before being ousted as president and a director in 2000 and 2001 during a bitter fight with Duke Energy, which acquired 20 percent of the company and eventually took control of management.
Through Canadian Superior, Noval counter-attacked with a C$700 million all-stock bid for Canadian 88 in spring 2001, but dropped the hostile bid two months later, citing a slump in Canadian 88’s market value.
Earlier, Noval had been banned from trading securities for a year for tactics he employed in trying to acquire Morrison Petroleums.
But there is a reluctance to write him off. Peter Linder, an advisor to DeltaOne Capital Partners energy fund, said Noval’s chances of finding another partner to finance further Nova Scotia drilling are “very slim.”
Even so, he said Noval has enough success when he rolls the dice that he is a magnet for those who like to gamble.
“He never gives up, so I would not be surprised if he makes another attempt,” Linder said.
For now, Noval can keep Canadian Superior afloat by exploiting his Western Canadian reserves of 36 billion cubic feet of gas and 23.8 million barrels of oil and gas liquids, plus 172,000 gross acres in Alberta.
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