Investors ‘owed 14 times as much’

By KRIS HALL – The Dominion Post | Monday, 19 May 2008

Former Southern Petroleum investors, who are seeking tens of millions of dollars from oil giant Shell in New Zealand’s longest running insider trading case, have been told the price paid for their shares could have been up to 14 times greater.

The hearing resumes today in the High Court at Auckland, with the plaintiffs eager to learn if former Southern Petroleum and Fletcher Challenge Energy director James Patek was at a deep gas study presentation in New Plymouth in November 1995.

It is alleged that revelations by a team of experts at the presentation, of undeveloped proven reserves in the Taranaki basin’s Mangahewa gasfield, prompted Mr Patek to push through the compulsory purchase by Fletcher Challenge of Southern minorities in December 1995.

The takeover was completed by January 1996. Fletcher Energy was bought by Shell in 2001.

Giving evidence last week, consultant petroleum geologist Tom Haskell said that had he been aware of the extent and results of the Mangahewa structure study, he would have recommended [to Southern investor John Oakley] that he ‘‘negotiate with Southern Petroleum on the basis of $11.22 per share”. Instead, a share price of 63 cents was offered to the 700 investors.

Earlier, Mr Haskell told the court that sections of the Taranaki basin deep gas and oil structures were connected by the porous nature of the seabed sediment.

If that had been known at the time, it would have had huge consequences for companies vying for the oil and gas.

The Taranaki petroleum prospecting licence in which Southern had a stake came up with the news of the reserves during the 1995 study which concluded the Mangahewa structure was ‘‘potentially bigger than New Zealand’s biggest offshore gasfield, Maui”.

The field has since been estimated to be capable of delivering more than seven trillion cubic feet of gas and oil.

The Maui field was about four trillion cubic feet.

Mr Patek and Shell dispute claims that Mr Patek was present at the gas study presentation in New Plymouth and maintain he was unaware of the discovery.

Evidence given by former Petrocorp exploration manager Steven O’Connor, however, placed Mr Patek in New Plymouth the following day, accompanied by people who had attended the presentation.

Mr Patek has not yet given his evidence to the hearing.

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