Alange says restatement was all just a miscommunication

Alange Energy, the Canadian oil explorer whose stock fell 36 percent today, says it misstated oil output based on a miscommunication between its Bogota and Toronto offices.

“We put in place a new reporting system to track capacity,” Peter Volk, secretary of the board of the Toronto-based company, said today in a phone interview. “There wasn’t clear communication between Bogota and Toronto about what to put in the MD&A,” he said, referring to the Management Discussion and Analysis section of quarterly financial reports. The error was discovered when the company was producing its year-end report, he said.

(There’s your Bloomberg-style lede. Now the good stuff.)

I pressed him on how an experienced oil executive like Luis Giusti could have made that mistake. “He was planning to report capacity in the MD&A,” Volk said. “He reported what he thought should be in there.”

I pointed out that in my experience in the press, numerical corrections like this are usually spotted and fixed in minutes or hours, not months. I asked whether that meant Giusti hadn’t read the filings. He said it didn’t necessarily mean that. He said it was just a matter of a missed word, “potential.” I asked how it was possible to miss such an important error for that long. “When it was provided to Toronto it made sense,” he said. “The trend in production growth was what we were expecting.”

The company has withdrawn all of its guidance and cleaned up all of its erroneous reports, he said. He didn’t specifically say that the press release from Aug. 30 stating that production had climbed to 3,500 barrels a day was erroneous, but he said not to rely on prior statements.

Regarding my ad hominem statements about Giusti pere and fils and about Endeavour Financial:

Luis Giusti Jr. did indeed work at Stanford Bank. “Unfortunately a lot of people are wearing that who probably had nothing to do with what was going on. It’s an unfortunate association.”

On Luis Giusti being accused of wrongdoing at PDVSA: “Being attacked by Chavez is a sign of honor. It probably shows he was doing his job correctly.”

On Endeavour: “This is not an Endeavour issue at all. They get involved in companies we found and we get involved in theirs. It’s not an Endeavour issue at all. Endeavour hasn’t been directly involved” since the company began trading publicly.

So the question then becomes: Does 40-year industry veteran Luis Giusti know the difference between production and potential production? I started to wonder if maybe there was a language issue here or something, but then I saw this clip. You don’t have to watch long. At 0:30, the interviewer says the company pumps 4,000 barrels a day. Giusti doesn’t correct him. Then at 1:00, Giusti himself says the company’s “equity oil” is 4,100 barrels a day out of “total operated production” of 7,300 barrels a day. He forecasts year-end output of “8,000 barrels a day equity oil.” I don’t hear the word “potential” in there.

At the time, the stock was hovering between 75 and 80 cents a share. More than 5 million shares traded hands that day, surely some of them bought by people who saw this BNN clip. Some poor SOB is on a Yahoo message board asking when the class action will start.