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As the Securities Commission celebrates settling its insider trading case against former Tranz Rail directors last week, an even longer-running case is crawling toward its own conclusion.
This week a trial date will be set for the Southern Petroleum shareholders seeking hundreds of millions of dollars in compensation for money they claim was lost during Fletcher Energy's takeover of the company in 1995.
Lawyer for the 700-strong shareholder group, Fraser Powrie, said yesterday that a trial was likely to be set for early May next year.
The group is seeking compensation at $5 a share, plus the interest that has built up over the 12 years since the takeover. The case seeks compensation of more than $165 million in total for all Southern Petroleum minority shareholders.
In 2001, the minority shareholder group sought compensation at $2 a share. But Powrie said that based on expert valuation advice, he was confident compensation at the level of $5 per share taken over was not unrealistic.
The group alleges vital information about the potential size of Southern Petroleum's Taranaki oil prospects was withheld during Fletcher Energy's takeover.
In 2001 Royal Dutch Shell and Apache bought Fletcher Energy and took on the responsibility of resolving the case.
Shareholder spokesman and former New Zealand Petroleum Company consultant Tony Gavigan said getting the matter to trial had cost about $8 million, a similar amount he claimed Shell had spent defending the case.
Southern Petroleum shareholders who have helped bankroll the case have included multi-millionaire property developer and investor Hugh Green, retired Wellington lawyer John Oakley and Grant Biel of Rural Aviation.
Unlike the Tranz Rail case, the Securities Commission has not been involved. In 2000 when original plaintiff and minority shareholder ElderCare first lodged its claim in conjunction with other minority shareholders, the commission had little power and could only watch as shareholders went in to bat for themselves.
The case involves information about a gas field, known collectively as a "deep gas study", which concluded that the combined hydrocarbon resources in the Mangahewa and adjacent Pohokura prospects could be almost as large as the Maui field.
In a letter to its lawyers in 2000, ElderCare, formerly New Zealand Petroleum, said that more than $3 million of gas predicted to be produced during the extended appraisal testing was pre-sold to methanol producer Methanex, reducing the cost of drilling from $8 million to $5 million.
The letter said that this information, which was not disclosed at the 1995 annual meeting nor in a special report to Southern Petroleum shareholders in November 1995, would have lifted the market value of the company's shares. When the information was released, Fletcher Energy's shareprice reportedly jumped $1 to $4 in late 1996 and in mid-1987 the price doubled to $8 as further information came to light.
However in 2001 fresh insider trading claims were lodged in the High Court at Auckland naming Fletcher Energy's executive James Patek as first defendant and the company as second defendant.
Not all shareholders were willing to go the distance to trial.
In 1999 ElderCare dropped its original claim alleging insider trading after Fletcher paid it $275,000 to settle two other claims. The following year ElderCare settled for $1.3 million with Fletcher Energy over more than 4000 disputed preference shares.
