Oil Startup Dodges Investor Suit Over Drilling Woes In Africa By Cara Salvatore
Law360, New York (August 26, 2015, 4:09 PM ET) -- A Texas federal judge on Tuesday dismissed an investor class action accusing oil and gas company Hyperdynamics Corp. of deceiving investors by issuing optimistic statements about failed offshore exploration efforts in Africa and failing to disclose a Foreign Corrupt Practices Act investigation.
Allegations in the complaint center on Hyperdynamics’ work off the coast of Guinea in western Africa. Ray Leonard, chief executive of the Houston-based company, is accused of painting a rosy portrait of operations the lawsuit says were really a mess. Over the course of 2011, Leonard spoke of receiving "excellent" data from a seismic survey, suggested there might be 6 billion barrels of recoverable oil and declared that "virtually all of the remaining hurdles" to drilling had been removed, the lawsuit says.
In February 2012, when the company announced it found only traces of oil during drilling expected to deliver large returns, the chief executive called the development "encouraging," the complaint says. The first suit was filed in April 2012. Then, in March 2014, two more suits were filed after information came out about an FCPA investigation connected to donations allegedly paid in Guinea. An amended complaint in the first suit followed in May 2014, adding FCPA-related claims.
In the Tuesday filing, U.S. District Judge Melinda Harmon refused to consolidate the three actions against Hyperdynamics, saying that two of them only concerned the FCPA issues. But she granted dismissal to the defendants in the first one, which focused on non-FCPA-related securities law allegations.
In the single suit being considered under the motion to dismiss, the so-called Parker suit, “plaintiffs have not alleged FCPA-related facts which would render either the sixteen risk disclosures or the four specific denials misleading by omission and which defendants had a duty to disclose," she said. "Furthermore, plaintiffs have failed to allege facts which would render the specific denials false or misleading."
The company was also accused of lying to investors about the costs for its projects. But the judge disagreed, saying they were close enough.
“The … models in the record do not plausibly support a claim that defendants misrepresented cost estimates or the adequacy of their funds,” she said.
“Plaintiffs chose to invest in a wildcat well in Guinea with an inexperienced operator having full knowledge of the geological, operational, and regulatory risks. Rule 10b-5 does not entitle them to a return on this investment,” she concluded.
The company had announced disappointing first-quarter earnings and exploration well costs in November of that year that were $55 million above expectations, sending its stock down 25 percent in a single day. The next month, drilling delays sent shares down 19 percent in one trading session, according to the complaint.
Attorneys for the parties were not immediately available for comment.
The plaintiffs are represented by Andrew Edison of Edison McDowell & Hetherington LLP.
The defendants are represented by Samuel Cooper, Ryan Fawaz and Edward Han of Paul Hastings LLP.
The case is Parker v. Hyperdynamics Corp. et al., case number 4:12-cv-00999, in the U.S. District Court for the Southern District of Texas.
--Editing by Jeremy Barker. |
