I listened to the entire playback of the presentation by Dick Gusella at The Credit Suisse 2010 Credit Products Conference in Miami which appeared on the Connacher Oil & Gas website on September 14th, 2010. During the question period he was asked about Connacher's ownership of Petrolifera shares. He said that some people have said why didn't you sell Petrolifera when the shares were $26 dollars a couple of years ago. He said we couldn't sell it at that time. It simply wasn't feasible. He continued to state that "in essence we are on a slippery slope to zero. " Connacher will one day sell its equity in Petrolifera, so there is no intention of Connacher management to buy out Petrolifera and to take it back.
In response to a question by sharky, on the Connacher board on Agoracom, about what Dick Gusella meant by his statement that: "in essence we are on a slippery slope to zero" I stated that it is my impression that he was specifically inferring that Connacher will eventually sell all of it's shares in Petrolifera at some future point. He in no way was implying that Petrolifera's shares would go down in value to zero. As the Chief Executive officer of both companies he could not and would not do that. He obviously wants to get the most value that he can for Connacher's shares in Petrolifera, through a future sale of all the shares that Connacher owns in Petrolifera. That is his responsibility. Also as the Chairman of Petrolifera his duty is to get the highest value for Petrolifera shareholders.
He may also have said this in response to the rumours on the Stockhouse board, the last couple of days, that Connacher will buy all of the Petrolifera shares that it currently does not own and become more like a small version of Petrobank Energy (with its various holdings). Once again he is only saying that Connacher's interest in Petrolifera at some future date will be zero.
His reasons for initiating a special committee at Petrolifera to undertake the strategic review of Petrolifera's options going forward he said was basically to spur interested parties who are currently negotiating with Petrolifera to farmin on properties in Argentina, but most likely in Columbia and Peru who are dragging their feet on signing deals with Petrolifera to commit to a firm decision. As well as spurring other companies who are thinking about buying Petrolifera assets, who have not yet come forward, to get involved now as there may be other bidders on specific Petrolifera assets. This makes sense. Farm in negotiations for Peru have been going on for years with interested farmin partners. Also, if Petrolifera can sell its properties in order to totally get out of Argentina now would I am sure be welcome. Over a year ago, you will remember at the height of the recession, there was a lot of interest in Petrolifera's Argentina properties for a low price. With a great deal of consolidation taking place now in the international oil and gas business, perhaps Petrolifera will be able to sell off some of or all of it's properties in Argentina for a higher price. This makes sense to me. It also may make sense to the large international oil company that is in the process of negotiating with Petrolifera to farmin on Petrolifera's Peru porperties just to buy Petrolifera lock stock and barrel. Then the large international company could control the entire Peru drilling program, without having to deal with Petrolifera as a 50% partner with operational control of the Peru program. Petrolifera as a small junior would be relatively cheap to buy out in it's entirety. This is what is going on. This could end up maximizing Petrolifera's share price for it's shareholder's (Connacher being it's largest shareholder) in the near term. If Petrolifera gets to dump it's Argentinian holdings, and pay down it's debt and gain more money to drill in Columbia immediately this would please us all I'm sure, in addition to speeding up the exploration program in Peru.
This is my understanding of Dick Gusella's comments.
Cheers; Scott
