CALGARY, ALBERTA–(Marketwired – Dec. 30, 2015) –
NOT FOR DISTRIBUTION TO THE U.S.A. NEWS WIRE SERVICES OR FOR DISSEMINATION TO THE U.S.A.
Groundstar Resources Limited (TSX VENTURE:GSA) (the “Company“) is hereby responding to the allegations by Edward Malek Farah contained in the Dissident Information Circular dated December 21, 2015 (the “Dissident Circular“).
- First and foremost, the Company wishes to highlight that it, unlike the Dissident Group, has a clear strategy for the coming months and years ahead. It is the Company’s intention to continue to reduce costs of all types as a crucial step toward protecting the Company’s future during these difficult times in the energy industry. The Company has been extremely successful in its efforts to reduce all non-essential spending; this is clearly evidenced by the reduction in general and administrative expenses by approximately $450,000 over the first two quarters of the current fiscal year relative to the same period last year ($285,259 at October 31, 2015, relative to $739,618 at October 31, 2014), which represents a period-over-period reduction of 61%. The Company’s general and administrative expenses are expected to continue to fall throughout the year as issues such as the proxy battle are resolved.
The Company’s operating expenses have also fallen by more than half during the same period ($165,076 at October 31, 2015 relative to $398,712 at October 31, 2014). Additionally, the Company has engaged qualified personnel who will be evaluating the numerous acquisition and drilling opportunities being created by the current market. These objective measures are a clear indication of the Company’s sound financial stewardship, which the Dissident Circular falsely called into question.
- The Dissident Circular indicates that the current Board is unable to perform in the oil and gas industry through highlighting that the Company has recently drilled a dry well, it’s only dry well. What it fails to mention is that the drilling success rate of the Company under the current Board is 80%, which is admirable. Not only has the Company enjoyed a high percentage of drilling success at Neilburg, its wells in that area have been shown to be exceptional assets that outperformed all other offsetting wells in terms of productivity and reserve base.
- Mr. Farah’s assertion that the current Board has somehow been negligent and that this negligence ultimately led to the General Cease Order is misleading. The Company’s prior management team consisted of the former Chairman of the Board and the former Chief Financial Officer. Mr. Tyron Pfeifer, the Chief Operating Officer, has not been involved in the day-to-day management activities of the Company and has instead acted in a consulting role in order to fulfill the Company’s need for a qualified geologist. This is clearly evidenced by the historical disparity in fees earned by the individuals mentioned above (for the year ended April 30, 2015 Mr. Pfeifer was compensated $26,056, whereas the former Chairman of the Board was compensated $214,787 and the former Chief Financial Officer was compensated $197,817).
During the period of time when the former Chairman of the Board and the former Chief Financial Officer were responsible for the day-to-day operations of the Company, the record-keeping fell into a state of disarray. This was discovered after the former Chief Financial Officer was terminated by the Company. In the following months, as the effort to clean up the administrative affairs of the Company continued and the year-end audit process began, it became evident that the financial statements filed by the prior management team had been materially misstated. These extensive misstatements, which have been made public in the most recent Quarterly Financial Statements, are what ultimately led to the General Cease Order.
No members of the current Board were ever involved in either day-to-day administrative duties or preparation of financial statements; to assert otherwise is inaccurate.
The Company has now completed the recovery process with respect to its administrative affairs and expects to meet all future filing requirements in a timely manner.
- The Board believes that Mr. Farah, as well as his proposed management team, is wholly under-qualified and unsuitable to run a public oil and gas company.
Mr. Farah, as stated in the Dissident Circular, has no direct experience in oil and gas. This is further evidenced by his lack of meaningful production, relative to the Company’s expectations, while working as a consultant for the Company. Originally brought on by the former Chairman of the Board to assist the Company in developing business, Mr. Farah’s consultancy proved to be costly and ineffective throughout his approximate 11-month tenure with Groundstar. During his brief engagement period, Mr. Farah charged over $140,000.00 in consulting fees and billed nearly $9,000.00 worth of additional expenses to the Company; $7,600.00 of which was for meals and entertainment. In contrast, the current Board has expensed a combined total of $0 for meals and entertainment while still successfully developing new business. To attempt to highlight the current Boards’ lack of financial stewardship while promoting his own fiscal responsibility is confounding.
Mr. Farah was ultimately let go by the Company for the following reasons:
- Inability to perform his duties to the satisfaction of the Board;
- The discovery that Mr. Farah was falsely representing himself as an Officer of the Company on his self-prepared business cards and various social and professional media sites. It was only after his termination, as well as receiving a cease-and-desist letter from the Company’s counsel, that Mr. Farah finally stopped making these false representations.
The Dissident Circular also proposes Gerry Talbot as the Company’s Chief Executive Officer. Based on the Company’s prior relationship with Mr. Talbot, the Company finds it inconceivable that any concerned, knowledgeable shareholder would assert his suitability for the Company’s leading role. Mr. Talbot is another former consultant to the Company who was originally brought on, again by the former Chairman of the Board, to assist in securing land deals. Mr. Talbot, like Mr. Farah, showed himself to be completely unable to perform his duties in the view of the Board.
Mr. Talbot was ultimately let go by the Company for the following reasons:
- Mr. Talbot was sub-contracting many of his duties to other individuals and institutions at a significant expense to Groundstar;
- The inability to function properly due to what appeared to be fairly routine alcohol consumption. Members of the Company’s former management team noted that Mr. Talbot would regularly arrive at the Company’s office while seemingly under the influence of alcohol (the Board believes, by virtue of verbal and e-mail communications from Mr. Farah to the Board regarding these behaviors, that Mr. Farah was aware of these issues);
- Lack of reliability and availability during key periods;
- Lack of meaningful production in the view of the Board.
The Company finds it perplexing that Mr. Farah would propose appointing a Chief Executive Officer who he acknowledged, through correspondence with other members of the Company’s team, was performing poorly for the company.
Further, the Dissident Circular proposes Mr. Moe Abdallah as the Company’s Chief Financial Officer. The Board questions his suitability for the following reasons:
- Mr. Abdallah does not appear to hold any of the qualifications necessary for a Chief Financial Officer of a publicly traded oil and gas company. Insofar as the Company can tell, Mr. Abdallah holds a Bachelor of Arts degree and does not appear to hold either a Chartered Accountant or Chartered Financial Analyst designation, which are typical qualifications for this sort of executive role. In addition to this, Mr. Abdallah does not appear to have any relevant prior work experience which would qualify him for an executive position at a publicly traded company.
- Mr. Abdallah is also a former consultant to the Company who was responsible for assisting the former Chief Financial Officer with the accounting and administrative functions of the Company. Given the state of the Company’s administrative records upon the departure of these individuals as previously detailed, it appears doubtful that Mr. Abdallah would help to improve or ensure the Company’s (now remediated) organization and administration.
Based on the above, the Board is of the view that the proposed team set forth in the Dissident Circular is unqualified and unsuitable to run a public oil and gas company.
- Mr. Farah has suggested that the Company was neglectful in hiring Mr. Ian Fisher as a consulting geologist. During his brief time at the Company, Mr. Fisher’s services were solely based on providing his extensive geological experience to help develop the Company’s assets. At no time was he in a position of financial decision making. Mr. Fisher was terminated immediately upon the news of his prior indiscretions being made public.
- Mr. Farah has expressed concerns that the Company did not call a special meeting for the shareholders in the timely fashion as he initially requested. The Company, again in an attempt to reduce spending, concluded that it was prudent to combine both the annual general meeting and the special meeting together as one. In the current economic environment, Mr. Farah’s conduct does not reflect the sensitivities associated with reduced revenues.
Management recommends that shareholders vote the YELLOW proxy and ignore the green proxy provided by the dissident group. Details on how to vote the YELLOW form of proxy are contained in the Management Information Circular being mailed to shareholders and available on SEDAR at www.sedar.com under the Company’s profile. Shareholders needing assistance with voting are encouraged to contact the Company’s transfer agent at (403) 776-3912.
This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
About Groundstar Resources Limited
Incorporated in 1968, Groundstar Resources Limited is a publicly traded oil and gas company actively growing a portfolio targeting producing oil and gas assets with development opportunities and exploration upside. The Company’s current portfolio of resource assets provides both near term and longer term potential. Groundstar is quoted and trades under the ticker symbol “GSA” on the TSX Venture Exchange.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.
Groundstar Resources Limited
Groundstar Resources Limited