Stockwatch Business Reporter "Arsenal Energy Inc. (AEI), a thinly traded holding of private investor Bruce Mitchell (who owns three million of its 19.4 million shares), lost three cents to $1.39 on 67,500 shares, after announcing an intriguing transaction of its own. It plans to merge with the Goldman Sachs-backed Lone Pine Resources Canada Ltd. (LPRC). The resulting company, which for now is being referred to as New Lone Pine, will be owned 77 per cent by the shareholders of LPRC and 23 per cent by the shareholders of Arsenal. Arsenal says it will release the exact ratios of New Lone Pine shares to be issued when it files its information circular next month. New Lone Pine will be an Alberta-focused producer with output of around 4,000 barrels of oil equivalent a day, of which about 1,250 will have come from Arsenal. Patrick McDonald and Tim Granger, the chairman and the president and chief executive officer of LPRC, will take over those same positions at New Lone Pine, while Tony van Winkoop, Arsenal's president and CEO, will become New Lone Pine's vice-president of exploration. The board will consist of members from Arsenal and LPRC and will be detailed in the information circular. (Investors might keep an eye out for David Fitzpatrick, a director of both LPRC and the above-mentioned Twin Butte. Mr. Fitzpatrick and Mr. Granger have a long history together. One of the most interesting chapters of that history is Compton Petroleum. Mr. Granger served as president and CEO of that company, and Mr. Fitzpatrick joined it as a director in early 2009, when the stock traded at the equivalent of $162. The actual trading price was 81 cents, but the stock rolled back 1 for 200 in August, 2011. In November, 2011, Mr. Granger, Mr. Fitzpatrick and virtually every member of management abruptly left Compton, in a move described by a Salman Partners analyst as "absolutely unprecedented" and suggestive of a "complete fracture at the board level." Compton was ultimately sold for just $1.25 a share in 2012.)
The above is all very interesting, but the press release left out the most fascinating thing about LPRC: its owner, the U.S.-incorporated Lone Pine Resources Inc. (LPRI), which is currently suing the government of Canada for nearly $120-million (U.S.). The lawsuit stems from a frack-fearing Quebec's 2011 decision to revoke one of LPRC's five licences in the province without compensation. LPRI is using a NAFTA clause to argue that Quebec's revocation was a violation of legal obligations on the part of the Canadian government. LPRI sees the revocation as an "arbitrary, unfair and inequitable measure based on political and populist grounds rather than actual environmental grounds" (as summarized by the Canadian government on its website). The Canadian government counters that Quebec has every right to exercise power, that LPRC still has four other licences to explore, and that LPRC does not own any of the licences anyway and so does not have a real claim (farmor Junex Inc. (JNX: $0.475) owns the licences). The government also says LPRC's assessment of $118.9-million (U.S.) in damages is "highly exaggerated." LPRI filed its initial notice of intent to start arbitration back in November, 2012, followed by the actual notice of arbitration in September, 2013. The in-between time had been spent trying unsuccessfully to find a mutually agreeable solution. It had also been spent trying to solve financial woes that predated the NAFTA suit. These efforts proved equally unsuccessful, and LPRI, which had been trading in Canada and the United States, went bankrupt and ceased to be a reporting issuer in 2014. Merging with Arsenal will allow a Lone Pine entity to regain a Canadian listing. As for the lawsuit against Canada, that is still continuing before the International Centre for Settlement of Investment Disputes (ICSID). The most recent filing (besides a May 27, 2016, procedural order about documents) was a 251-page screed from the Canadian government, dated Jan. 15, 2016, and written entirely in French. ICSID and LPRI both make their filings in English. Evidently the government, in no rush to make its legalese any easier to understand, wishes its adversary to take the extra step of finding a translator."