Palo Alto weighs in on conflict of interest issues between Canadian Superior, Challenger Energy

By Lisa Kerner

Charlotte, N.C., Nov. 6 - Canadian Superior Energy Inc. investor Palo Alto Investors, LLC said it completed its own review of the company's current, as well as its proposed, corporate governance structure.

As a result, Palo Alto identified several steps the company's board of directors could take to mitigate or even eliminate "all real and perceived conflicts of interest" between Canadian Superior and Challenger Energy Corp., a vehicle formed to secure financing for Canadian Superior's Block 5(C) project in Trinidad.

Palo Alto made its recommendations in a Nov. 5 letter to Canadian Superior's board of directors. The letter was included in a schedule 13D/A filed with the Securities and Exchange Commission.

According to Palo Alto:

• The special committee created by the board to review transactions between Canadian Superior and Challenger should be provided with a broader mandate and should engage independent outside counsel;

• The board and special committee should prepare for future conflicts between Canadian Superior and Challenger such as the bridge loan that becomes due and payable by Dec. 31 if drawn upon by Challenger;

• The board should do more to enhance corporate governance such as further clarifying the specific roles, responsibilities and authority levels of each executive officer;

• The company should consider reconstituting its board of directors to include independent directors with relevant international oil and gas expertise and corporate governance backgrounds; and

• The board should identify a lead independent director whom shareholders can contact directly with concerns and views.

In September, Palo Alto asked executive chairman Greg Noval to resign from Canadian Superior's board, citing various conflicts of interest.

Noval is also chairman of the board of Challenger.

According to Palo Alto, the Trinidad project is at a point where the corporate governance structures of Challenger and Canadian Superior create a conflict that "makes it impossible for Mr. Noval to simultaneously act in the best interest of shareholders of both companies."

Palo Alto said Noval had a "significant financial interest" in Challenger of 10.1%, compared with his 0.03% interest in Canadian Superior, it was previously reported.

In a Sept. 29 letter to Canadian Superior's board, Palo Alto said if Noval does not resign, it will consider all options available under both Canadian and U.S. law.

Palo Alto, a long-term investor in Canadian Superior, owns approximately 15.75 million shares, or 9.9% of the company's common shares outstanding.

Based in Calgary, Alta., Canadian Superior is a crude oil and natural gas exploration and production company with an emphasis on exploring for and producing crude oil and natural gas in western Canada, Nova Scotia and Trinidad and Tobago.

Mentioned in this article:

Canadian Superior Energy Inc. AMEX: SNG

Challenger Energy Corp. AMEX: CHQ

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.