LITIGATION SERVICES


      

Since 1984, Ammonite Resources has been heavily involved in oil, gas, coalbed methane, oil sands, and mining litigation, serving as investigators, advisors to counsel, and as expert witnesses. Some of the legal subjects for which Ammonite has provided advisory services include:

Representative examples of Ammonite's litigation activities include:

A Dispute Between Royalty Owners and the Operator of a large Coalbed Methane Field:

During 2009 – 2010 Ammonite has advised legal counsel to the operator of a large coalbed methane field in Alabama regarding operating costs for salt water disposal. Royalty owners have sued the operator claiming that the charges for water disposal are excessive (royalty payments are net of water gathering and disposal charges).  Ammonite’s coalbed methane expert researched comparable operations in Alabama and other states, and has prepared an expert report and testified at his deposition, that the water gathering charges are reasonable and fair. The case will be tried early in 2011.

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A Canadian Securities Matter : 

In 2005 Ammonite was retained to advise the Canadian Law firm Siskind, Cromarty, Ivey and Dowler on a matter involving representations made by Canadian Superior Energy, a public oil and gas company, regarding the results of an exploratory well drilled offshore Eastern Canada.  Canadian Superior claimed that a significant discovery had been made, yet the operator plugged and abandoned the well without testing, and Canadian Superior’s stock price crashed as a consequence.  Ammonite experts examined technical geological and engineering documents in New York and Toronto, and eventually testified in an arbitration proceeding in Calgary, where the litigation was settled.

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 Internal Revenue Service: During the period 1987- 2001, Ammonite Resources was the oil and gas advisor to the Abusive Tax Shelter Task Force of the United States Internal Revenue Service. Ammonite's experts testified in four IRS tax fraud cases that came to trial in New York, Los Angeles and Houston. All four cases were won by the Government, largely as a result of Ammonite's testimony. A fifth case was dropped prior to trial on Ammonite's recommendation, as we believed the IRS position was not supported by the technical data. At times, we found ourselves also advising the Justice Department on criminal aspects of some of the IRS fraud cases.  Our last assignment for the IRS ended on September 11, 2001 when the government’s case files at 7 World Trade Center were destroyed in the 9/11 terrorist attack.

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ACQUISITION OF VASTAR RESOURCES, INC. BY BP AMOCO: 

In March 2000, BP Amoco, as part of its acquisition of ARCO, announced that it was planning to acquire for $71 per share the approximately 17,680,000 shares of Vastar Resources Inc. held by the public. The offer was made just as natural gas prices began to soar, and Vastar's deep Gulf of Mexico production was coming on stream.  Investors who felt they were being denied the upside potential to Vastar's stock price in a rising market filed a series of class action lawsuits. BP Amoco and Vastar were represented by the investment banking firms of Morgan Stanley, Petrie Parkman, and Salomon Smith Barney, and by counsel that included Sullivan & Cromwell and Fried Frank.  Ammonite Resources was hired as geotechnical advisor by the lead plaintiffs' counsel, Milberg Weiss Bershad Hynes & Lerach, LLP. We assisted plaintiff's counsel in developing the case for a higher purchase price based on an analysis of Vastar's significant Gulf of Mexico asset base and the expectation for sharply highly commodity prices. Ammonite prepared questions for the deposition of Vastar's investment bankers, participated in a conference call between all parties to the litigation to discuss the settlement offer price, and submitted an affidavit regarding the reasonableness of the agreed settlement price to the Chancery Court of the State of Delaware.  

     BP Amoco raised its price to $83/share in settlement of the litigation. The value of the transaction was in excess of $1.4 Billion.  Ammonite was advised by plaintiffs' counsel that the Chancery Court relied heavily on Ammonite's opinion regarding the "reasonableness" of the $83 share price in its approval of the settlement.  Petrie Parkman was paid  $5,150,000 and Salomon Smith Barney was paid $5,650,000 for their advisory services to Vastar. Ammonite was paid $24,839.03!

     Ammonite's affidavit is reproduced below.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

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IN RE VASTAR RESOURCES, INC. :                         CONSOL. C.A. No. 17888
SHAREHOLDERS LITIGATION :
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AFFIDAVIT OF G. WARFIELD HOBBS IV

1.     I am G. Warfield Hobbs IV. Plantiffs' counsel retained me to advise them on certain      matters concerning the oil and gas industry as they pertain to the subject litigation. I am the managing partner of Ammonite Resources Company, a firm of international and domestic petroleum consultants which I founded in 1982. Ammonite Resources is headquartered in New Canaan, Connecticut, and has over 20 professional associates located in such petroleum centers as Houston, Dallas, New Orleans, Oklahoma City, Denver, Calgary, London and Buenos Aires. The firm specializes in performing geological, geophysical, engineering, economic, contract, and general business due diligence within the oil and gas sector. Ammonite is best known as a firm that is able to evaluate both the geotechnical and financial issues of a oil and gas transaction, at either a project, or company level. Our clients include operating oil and gas exploration and production companies, financial institutions, law firms, private investors, and various agencies of the United States Government. My personal qualifications include a B.S. Degree in Geology from Yale College; a M.S. Degree in Petroleum Geology from the Royal School of Mines, University of London; ten years of work as an exploration geologist with Texaco, Inc. and the Amerada Hess Corporation; and twenty years of work as an independent consultant. I am a licensed Professional Geologist in the states of Florida (PG#1039) and Pennsylvania (PG#2685), and am a Certified Petroleum Geologist (CPG#2844) of the 30,000 member American Association of Petroleum Geologists (AAPG). I am presently the president of the Division of Professional Affairs of the AAPG. On July 26, 2000, I was invited by the Senate Committee on Energy and Natural Resources to testify before the Senate on the issue of US Natural Gas Supply, and the factors that are causing rising commodity prices. The valuation of Vastar is linked directly to the commodity price of natural gas.

2.     I was asked by plaintiffs' counsel to review documentation concerning the original offer by BP-Amoco to purchase the shares of Vastar Resources, Inc. at $71/share; to review the allegations made in the shareholders' complaint; and to advise counsel as to the reasonableness of the BP-Amoco offer, and the merits of the allegations in the complaint.

     In the course of analyzing the proposed transaction, I reviewed: a) the public disclosures of Vastar, including annual reports and 10-K's for 1998 and 1999, and all press releases for 1998, 1999, and through July, 2000; b) numerous security analyst reports on the company prepared during 1999 and 2000; c) public announcements of Vastar and of BP-Amoco concerning the proposed acquisition of Vastar by BP-Amoco; d) oil and gas commodity prices during 1998, 1999, and 2000, including the NYMEX futures; e) petroleum industry trade journal reports, and reports of the US Energy Information Agency regarding oil and natural gas supply and demand projections. I also consulted with professionals within the oil and gas industry who were familiar with Vastar's operations in the Gulf of Mexico. In July, I reviewed non-public documents concerning the proposed merger that had been prepared by Vastar and the investment bankers to Vastar and BP-Amoco.

     On the basis of my review of the above mentioned documents, as well as my opinion regarding the outstanding offshore leasehold position of Vastar, the company's outstanding track record of exploration success in adding substantial new reserves at a relatively low cost compared with its peers, and the upside potential of Vastar in an environment of sharply rising commodity prices, I concluded that the offer of $71/share was not adequate compensation to the shareholders of Vastar.

     I prepared a chronology of events leading up to, and following the purchase offer for plaintiffs' counsel, and documented the rise in oil and gas commodity prices prior to and subsequent to the purchase offer. I participated in a conference call between plaintiffs' and defendents' counsel, representatives of BPAmoco and the Vastar Special Committee, and the investment banking advisors to Vastar and BP-Amoco. Further, I also prepared technical questions regarding the oil and gas reserve valuation issues of the proposed merger, for use by plaintiffs' counsel in their depositions of defendants and defendants' external advisors.

3.    Based on the information I have reviewed, I believe the increase from $71/share to $83/share is fully justified by the significant increase since mid-March, 2000 in the spot oil and gas price, and the 12-month and 24-month NYMEX futures prices. I am not prepared to say whether the $83/share price is "fair" to the shareholders of Vastar, as I have not had access to the complete information and personnel of Vastar that would be required to express such an opinion. However, it is certainly not an "unreasonable" offer price; and further, it is likely that negotiation of a price much higher than $83/share would face substantial hurdles, given the uncertainties and risks in projecting future commodity prices and the success of Vastar's future drilling activities.

4     My fees and expenses for services rendered to plaintiffs' counsel concerning the Vastar litigation since April, 2000 total $24,839.03

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E. F. Hutton & Company, Inc: During 1984-1985, Ammonite advised the former securities firm of E.F. Hutton & Company on six class action tax shelter litigation matters involving oil and gas limited partnerships with operations in the Gulf Coast, Mid-Continent, and Rocky Mountains. Hutton was the defendant, and all litigation was successfully settled.

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 Callon Petroleum Company: Ammonite was retained by the Callon Petroleum Company in 1987 to prepare a fairness opinion and to testify in chancery court in Natchez, Mississippi, regarding the consolidation into a master limited partnership of 29 public and private limited partnerships which had an original aggregate capitalization of $294 million. The court accepted Ammonite's expert opinion, dissolved the partnerships, and permitted the Callon master limited partnership to be formed. Ammonite's professional fees were less than $100,000. The former investment banking firm of Kidder, Peabody & Company had offered to perform the same services for a $1 million fee.

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  Maxus Energy: In 1995 the Argentine company YPF made an unsolicited $800 million tender offer for the common shares of Maxus Energy, a large independent international oil company. Ammonite was retained by the law firms representing the shareholders of Maxus in a class action lawsuit to determine if the share price offered by YPF was fair. First Boston Corporation represented Maxus, and Solomon Brothers represented YPF. Ammonite advised counsel as to what technical documents to subpoena in the shareholder litigation, and reviewed the independent reserve reports for the producing properties of Maxus in the USA, Indonesia, Ecuador and Bolivia, and exploration prospects in Colombia and Venezuela. Ammonite reviewed the First Boston valuation of Maxus, and assisted counsel in preparing questions for the depositions of the senior management of YPF, Maxus and First Boston. Ammonite prepared an expert's report and was deposed by counsel to Maxus. On the basis of Ammonite's findings, the offering memoranda were amended twice to include material information that had not been disclosed to shareholders. The suit was settled the night before the case was to be heard in the Delaware Chancery Court.

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  Private Energy Company Partnership Investors: Ammonite was retained by counsel to investors in a series of limited partnerships offered between 1986 and 1991, which raised over $100 million for funding the Gulf of Mexico exploration and development activities of a Houston based private exploration company. After review of thousands of pages of documents, it was Ammonite's conclusion that the oil company and the drilling fund promoter had systematically misrepresented and grossly exaggerated the drilling results and reserves discovered in their disclosures to investors. Ammonite's expert defended his findings during three days of deposition. The case was settled out of court.

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International Mining Securities Fraud: Beginning in 1997, and continuing through 2001, Ammonite was retained to provide technical assistance to counsel for the US plaintiffs in the CDN$ 6 billion Bre-X Minerals Indonesian gold mining scam. Ammonite’s consultants examined thousands of pages of documents in New York, Houston and Toronto, and advised counsel on mineral assays, mine planning and development, and what can go wrong in a mineral exploration and development project; and how the Bre-X fraud was likely perpetrated.

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Coopers & Lybrand LLP: Ammonite was retained in 1998 by Coopers & Lybrand to research the Mont Belvieu, Texas natural gas liquids market, and the relative importance of the Mont Belview market to the USA and world natural gas liquids markets. This work was done on behalf of a Latin American company that was an importer of natural gas liquids, and was a party to an international trade lawsuit involving natural gas liquids.

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