Comments from Stockwatch Energy 11/22/22 Here in Canada, one Alberta junior has learned that it is not receiving a long-hoped-for -- if long-shot -- financial windfall. Tony Berthelet's Prairie Provident Resources Inc. (PPR), down one cent to 20.5 cents on 1.31 million shares, announced this morning that it has lost its NAFTA arbitration claim against the government of Canada. The company was seeking $118.9-million (U.S.) in damages. The arbitrators took their time coming to their decision.
The matter predates Prairie Provident itself, going back to a predecessor called Lone Pine Resources. Lone Pine was registered in the United States (hence the NAFTA claim) and was attempting to develop assets in Quebec. The Quebec government revoked the assets for purported environmental reasons in 2011. In November, 2012, Lone Pine submitted a notice of intent to begin arbitration before the International Centre for Settlement of Investment Disputes (ICSID), seeking $118.9-million (U.S.) in sunk costs and lost development opportunities. After 10 years, dozens of hearings and procedural orders, and even the death and replacement of the lead arbitrator, a three-member panel has finally rendered its decision.
The decision has yet to appear on ICSID's website, which merely notes the conclusion of the proceedings, but today's announcement from Prairie Provident (the Alberta-based successor of Lone Pine since 2016) offered a brief summary. Two of the three panel members found that Quebec's actions did not constitute a violation of NAFTA. Although one dissenting member found that Quebec did violate NAFTA, the majority decision stands. Any hopes for a $118.9-million (U.S.) pot of gold are dashed.
Shareholders seemed disappointed but unsurprised. Many of them gave up hope on this particular lottery ticket long ago. Most prominently, Goldman Sachs -- which previously invested in Lone Pine and went on to own more than one-quarter of Prairie Provident's shares after its formation in 2016 -- returned virtually all of the shares to Prairie Provident in March, 2021, for "nominal consideration." It did not mention the arbitration, but remaining shareholders felt that the message was clear.
As for Prairie Provident, it put on unruffled air, saying it was not counting on an award anyway. It has no shortage of other priorities to occupy its mind. For one thing, its roughly 4,000-barrel-a-day production is still well below pre-COVID levels of over 6,000 barrels a day. For another, it is keen to refinance its debt ahead of what will likely be an uncomfortable review with its bankers next month. The refinancing efforts were presumably being led by former chief financial officer Jason Dranchuk, but he left last week (after only eight months on the job). The company is looking for a new CFO.