For info below, copy of a complaint that I lodged with the ASX back in Feb 2009 regarding the Poor Disclosure practices that MAE has had for the past few years. Heard nothing more about this from the ASX but noticed that MAE's subsequent disclosure contained less "Motherhood" type grandiose statements. This info may save a few potential investors a bit of research.
For disclosure purposes, I note here that I am not a bitter twisted loss making ex holder of MAE shares, I have traded them quite profitably in the past. I have not touched them in the last 8 months, nor do I intend to now, as there are other shares more suitable to my risk profile.
""""ASIC/ASX By email 26 February 2009 To Whom it may concern, RE: Marion Energy LTD (MAE)- Potential breach of Continuous disclosure obligations and apparent misleading disclosure practices- Shareholder Losses a possibility if ongoing breaches occur I write to you to highlight what I perceive to be an apparent case of misleading disclosure by Marion Energy LTD and its officers. It furthermore concerns me that there is potential for shareholder losses if there are further instances of word smithing and half truths potentially designed to prop up the share price which are occurring. These are extracts from the company announcements lodged with the ASX over the past few months
On 27/08/ 2007- yes 2007, which had the headline Clear Creek Production commences at over 7mmcf/day ""Production commences with the Ridge Runner wells. The 4 Ridge Runner wells on the Ridge at Clear Creek (RR 11-17, 13-17, 11- 20 and 2-19) were connected to the gathering infrastructure at the end of July. Production operations have commenced at the Ridge Runner 11-17, 13-17 and 2-19 wells. Initially production was slightly delayed as the original sales pipeline had not been in use for over 30 years and when the natural gas and associated water production started, the flow was severely restricted by residual scale build up in the line. This has taken several weeks to successfully clean out. Following this successful cleanout, the Ridge Runner 11-17 has established sustainable production at over 7 million cubic feet of gas per day over a seven day period. With the RR 13-17 and 2-19 wells, some minor initial problems were encountered with the submersible electrical pumps. Steps have been taken to remedy this situation: these wells are expected to commence full production in the near future. We expect to have all three wells on the Ridge producing at close to capacity shortly. (The RR 11-20 well is currently shut in due to a new well being drilled off the same drill pad, refer below for details)."" On 6 June 2008- headlined "Gas production and Sales established at Utah operations??
""Normal field operations have resumed at the Clear Creek and Helper projects. Natural gas plants and compressor stations at Clear Creek and Helper fully commissioned. Gross production and sales volume currently ranging between 3 and 6 million cubic feet of gas per day (and increasing) at a current average sales price of $US10 per mcf. ? On target to achieve a level of 20+ million cubic feet per day from current wells.""
On 13 November 2008- with the headline ""Production Milestone of 5mmcf/day achieved""
""Marion Reaches Milestone Production Rate in Excess of 5 Million Cubic Feet of Gas per Day and Increasing Production Milestone Reached Marion Energy Limited (ASX: MAE) is pleased to announce that following the treatment of its Clear Creek wells for hydrate issues, it has achieved a gross production rate in excess of 5 million cubic feet of gas per day. The Clear Creek wells are currently being brought into full production status following these treatments and it is anticipated that production will therefore continue to increase as these operational activities are completed. As new production milestones are reached, the Company will further report to the market. The Company maintains its view that its targeted gross production rate of in excess of 20 million cubic feet of gas per day will be achieved from current and completed wells.""
and on 30 Jan 2009- Quarterly Activities Report
""Significant goals achieved: ? A steadily increasing daily production rate which reached 5 million cubic feet (?mmcf?) of gas per day during the quarter, and which will substantially increase over time with the elimination of a number of technical constraints (refer below)
During the Quarter, the Company?s production reached 5 million cubic feet of gas per day as infrastructure was commissioned. Further additions and adjustments to the infrastructure were subsequently completed at Clear Creek which will accommodate increased levels of production as, weather permitting, uninterrupted run time is achieved.""
"It should also be noted that industry practice in the USA is for revenue from gas sales to be received approximately 45 to 60 days after the production is actually delivered into the production grid. Therefore most of the November and all of the December production revenues are excluded from this quarterly report as they had not been received during the reporting period. Production during the November and December period was increasing significantly and the financial impact of this will be reflected in the March 2009 Quarterly Report.""
AND THEN in their latest ANN dated 23 Feb 2009, coincidently release a few hours after a lot of internet chatter on investor forums as well as stock news letters, pointing out that their publically available production data on the Utah Oil website does not reflect the stated gas production volumes per any announcement. The wording makes it quite apparent, to me anyway, that they have now backtracked on their previous announcements regarding production. It begs the question, why did they never release an announcement stating that the production was in fact having problems. One would think that an announcement for a production milestone being reached is made after a certain number of days of consistent production, which all of their announcements imply. Conversely, if production cannot be sustained at the previously announced level for a similar period of time, an announcement should also be made. These have never been made. The extract from the announcement that is pertinent is as follows: ""Production/Operations The December 2008 Quarterly Report for the Company contained a very comprehensive report on field operations that had been undertaken during the previous twelve to eighteen months. Despite the major challenges faced due to size and complexity of operations, in the December 2008 Quarter the Company reached a point where it was confidently able to state that its wells collectively had reached a level of operations at which they were capable of producing 5 million cubic feet of gas per day, that it would in the near term be able to sustain this level and increase it and that it remained confident of ultimately reaching its targets for production.""
Key words in all previous announcements were that they are in daily production, not "a tested capacity to produce" or capable of production. Saying ""Production Milestone Reached"" is different to saying a tested capacity of or anything similar. It?s like saying I am producing 100 0000 widgets a day when in fact I have just built the factory. After all of the announcements, the company share price moved up. They had already announced a production "capability" in excess of their 7mmcf/day, in August 2007. There was never a company announcement to clarify that production would not be reached shortly thereafter, which one would expect to be the case if they are able to announce positive production data.
If one looks back at their production data for the past 18 months (Table hereunder- data from http://www.oilgas.ogm.utah.gov/Data_Center/LiveData_Search/production.htm) , it becomes patently obvious that their monthly gas production never exceeded 0.73mmcf/day (Mmcf=Million Cubic Feet, and Mcf = thousand cubic feet). The production figures also seriously call into question their claim of producing even 5mmcf/day, because if they had managed to produce that for even 3 days, it would exceed their total monthly production for all months, except Nov and Dec 2008. Sum of Mcf Gas Report Period Total 7/01/2007 7,515 8/01/2007 9,003 9/01/2007 9,347 10/01/2007 8,321 11/01/2007 6,086 12/01/2007 8,183 1/01/2008 7,921 2/01/2008 6,289 3/01/2008 6,906 4/01/2008 8,192 5/01/2008 8,124 6/01/2008 12,274 7/01/2008 11,875 8/01/2008 13,279 9/01/2008 14,711 10/01/2008 14,742 11/01/2008 21,922 12/01/2008 20,305 Grand Total 253,513
All of the above and other inconsistencies in other announcements lead me to have some concerns regarding the company?s disclosure practices and the potential for shareholder losses. Based on publically available information, it is apparent that the company has sufficient funding only until June 2009, with an insufficient revenue stream to meet their current financial obligations. Its debt is due for renegotiation at that time. The company is supposedly now in the process of gathering expressions of interest for their assets using Goldman Sachs as advisors. There is now a short window of time of 4 months in which to finalise any sale process, and as such a continuation of their lack of honest disclosure has the potential to harm many shareholders. I have not requested clarification of my thoughts from the company, as, for obvious reasons, I did not feel that I would obtain an honest response.
I am not currently a shareholder, having sold my holdings quite some time ago based on the disclosure inconsistencies.
Yours sincerely""""
MAE Price at posting:
2.0¢ Sentiment: None Disclosure: Not Held
