D-day for oil, gas compo bids

Seven days from now, a little-known group of oil and gas investors will go up against multinational Shell as New Zealand's longest-running insider-trading case finally lands in court.

Fuelled by spiralling oil prices and the tireless Tony Gavigan, a group of former Southern Petroleum shareholders will enter the High Court at Auckland seeking millions of dollars' compensation for alleged misinformation by Fletcher Energy in its 1995 takeover of the Southern subsidiary.

Shell, which bought Fletcher Energy in 2001 and thus owns the assets of Southern, is funding the litigation and costs of bringing the case, after a 2003 Court of Appeal ruling upheld the right of the plaintiffs to press on.

Mr Gavigan, a shareholder activist, is confident former shareholders have the "relevant information and details" to prove price-sensitive information was withheld in the takeover.

"I can't say too much, for obvious reasons, but there is plenty to be said on the issue. There's going to be a lot of finger-pointing because we have managed to get our hands on some significant data.

"We believe we can prove that, had information been disclosed to the market in 1995, nobody would have sold their shares. Why would they? The conditions were perfect - [shareholders] had nothing to lose and everything to gain."

In the lawsuit, 700 Southern minorities allege Fletcher, which had 85 per cent of Southern when it launched its takeover bid, had insider information showing Southern's oil prospects were worth far more than it offered.

The claimants, many of whom have died since the case was first lodged, argue that when Fletcher bought them out in 1995 it had good news concerning a deep gas study of Southern's Mangahewa field, in Taranaki, but did not reveal it.

The 2003 Court of Appeal hearing was told the 1995 gas study concluded the Mangahewa prospect was "potentially bigger than Maui" and the likelihood of recovering hydrocarbons was high.

Southern shareholders were paid 75 cents a share in the takeover but say they would have got more - Mr Gavigan said it was estimated shares would have traded as high as $3 - had the information been made public.

And in a further twist, in 2006 Greymouth Petroleum announced its Turangi discovery - part of onshore Taranaki petroleum prospecting licence 38705 in which Southern reportedly had a stake.

The Greymouth find, Mr Gavigan says, proved long-held theories relating to deep gas prospects in the part of Taranaki under question as well as possible links between Mangahewa, Turangi and Pohokura.

"It shows the Taranaki basin was hiding a lot more than people were led to believe in 1995. Obviously, [shareholders] want a piece of what they think they're owed."

The claimants squaring up to Shell own about 10 million shares and claim the amount owed to them is about $23 million.

What started in 1995 has been the focus of a series of court appearances - Shell has already paid the plaintiffs $1 million.

In November, Southern shareholder John Oakley settled out of court, though details remain secret. That case, involving claims of a breach of fiduciary duty, was brought under common law against Fletcher directors.

Mr Gavigan says minority shareholders are very keen to know terms of the settlement, as it would be something of a marker going into next week's hearing.

In a recent preliminary ruling, Justice Hugh Williams refused an application by the plaintiffs for details of the settlement agreement.

Shell did not respond to calls.

- © Fairfax NZ News