Agreement gives Poseidon investors hope of recovery from failed oilfield firm - NEWS 95.7
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Agreement gives Poseidon investors hope of recovery from failed oilfield firm

Last Updated Dec 21, 2017 at 6:20 pm AST

CALGARY – Investors in failed oilfield services firm Poseidon Concepts Corp. are being offered hope of some compensation under a proposed settlement reached by the law firm leading a class action lawsuit.

Toronto law firm Siskinds LLP says up to $36.5 million would be contributed from insurance policies to be distributed to shareholders, as well as other claimants including lenders, under the agreement with directors, officers and other related entities unveiled Thursday.

“The only realistic source of recovery at this point in time is the balance of the liability insurance policies of the directors and officers, which is very rapidly depleting,” said Siskinds associate Sajjad Nematollahi.

“What makes sense at this point in time is to preserve the only source for a recovery for the claimants.”

Poseidon’s assets have already been sold off by a court-appointed monitor for less than its secured debt.

Under the settlement, an initial instalment of $7.6 million would be assigned to the class action and $21.3 million would go to the company’s estate to be distributed by the monitor according to a formula that usually gives first claim to secured creditors.

The actual amount each shareholder stands to receive will depend on the court’s ruling. Nematollahi said more than 2,000 shareholders are registered under the class action and the court will also take into account outstanding legal fees and costs.

A second instalment of up to $7.5 million in insurance funds would be set aside until April 2019 in case it is needed to help directors and officers defend themselves in regulatory or criminal proceedings.

Nematollahi said the agreement includes a strategy to move forward with legal claims against Poseidon’s auditors and the underwriters of a January 2012 share issue.

The two parties are opposing the deal which is to be presented to an Alberta court in February for approval, he said.

Poseidon was spun out of Calgary-based Open Range Energy in November 2011 to develop and market its storage systems — resembling gigantic above-ground swimming pools — to be used to handle the enormous amounts of water required for oilfield fracking operations.

The value of the new company’s shares soared, but fell quickly after February 2013 when it announced that it had incorrectly recorded about $100 million in revenue in the first nine months of 2012.

In June, the Alberta Securities Commission ordered Poseidon’s former U.S. senior sales executive to pay $750,000 in fines and costs. Last year, three of Poseidon’s other executives agreed to pay fines and accept trading bans after admitting to the ASC they had failed to file financial statements in accordance with proper accounting principles.

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