Dow Jones to Alange (ALE.v): Thank you sir may I have another?

In November, Dow Jones Newswires got spun and duped by Alange Energy CEO Luis Giusti.

“There’s a lot of investor appetite here,” Giusti said. The company will likely book a profit next year after reporting a net loss of $7.6 million in the second quarter. The company’s equity oil production in the second quarter neared 3,600 barrels per day and the company plans to close the year at 8,000 barrels of equity oil per day, Giusti said.

We now know that the 3,600 barrels a day number was wrong, and that the 8,000 barrels was a fantasy.

But rather than calling the guy up and putting him on the spot about this, Dow instead gives the story the best possible spin, running an apologia that’s much more positive than anything the company itself has put out.

The chief executive of a small oil firm in Colombia has left the company after its shares plunged when it had to retract previously stated production numbers, but the incident is unlikely to put a dent in Colombia’s booming oil sector…

Don’t worry folks, Colombia’s still a fine place to invest, that executive is gone.

…Some analysts say Alange had little choice but to do what it did, while others say the firm seemed to show little concern for shareholders.

That sentence confuses me. Did Dow find someone who said that Alange showed concern for shareholders? I’d love to see that person quoted, and then publicly mocked.

…Jennifer Stevenson, manager of the C$63.9 million Dynamic Global Energy Class Fund, is expecting [exploration success]. She participated in Alange’s share offering that the company did as part of its recapitalization, undeterred by the revision of Alange’s output data.

“I think the (offering) was a good opportunity to get in at a good (price) level,” following the cuts to the figures, said Stevenson, who owns three million Alange shares. “The assets are still there and we’re getting” new management with a mandate to streamline and refocus the company.

Sorry to be a bore, but it’s a classic journalism error to say what someone is expecting. You don’t know what she expects. You know what she said. And unfortunately, she was speaking in bankerese.

Now, I don’t have access to the Ottotrans™ (the strange device that translates financial BS into English), but it’s possible (who knows!) that her quote would come out something like: “I bought as a favor to my university pals who work at Canadian banks. They were at risk of losing $47 million. We’ll get a nice chunk of that paid off, and I’ll be able to sell the stock for a healthy return. After all, plenty of people trust Dow Jones stories.”

…Natalia Agudelo, an energy analyst at Celfin Capital in Medellin, said Giusti brought a lot of credibility to the Colombian oil sector. Although he is no longer the CEO of Alange, the fact that he remains on the board should keep the confidence level relatively high.

Wait, didn’t you say up above that the executive had “left the company”? Well, anyway, good thing he didn’t — because nothing says “confidence” like having a guy on the board of directors who doesn’t know the difference between oil output and “potential” oil output. (Oh wait, yes there is — having a guy there who just a month ago sold all his shares at prices at least 50% higher than Friday’s close. Funny how Dow forgot this tidbit.)

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11 thoughts on “Dow Jones to Alange (ALE.v): Thank you sir may I have another?

  1. Petroleumworld

    100% with you, it looks that the missing tidbit issue (guiso) in Colombia is been handle by experts (guisadores) and the bus has arrive in the stock market.

    By Dan Molinski and Ben Dummett
    Of DOW JONES NEWSWIRES
    BOGOTA (Dow Jones)–The chief executive of a small oil firm in Colombia has left the company after its shares plunged when it had to retract previously stated production numbers, but the incident is unlikely to put a dent in Colombia’s booming oil sector.

    The company, Alange Energy Corp. (ALE.V), is a startup Canadian-based firm that focuses on oil and natural gas exploration and production in Colombia. It issued a corrective press release last week explaining that oil production numbers it provided to investors a couple of months ago were for production capacity, not actual production.

    “The daily production rate as at November 29, 2010 was 2,609 barrels of oil equivalent per day (boe/d) rather than the reported 4,300 boe/d,” Alange said. The company’s shares immediately went into a nose-dive, falling 35% in one day to 33 Canadian cents from 51 Canadian cents. On Wednesday, the company said Luis Giusti, its chief executive and co-founder and a well-known figure in Latin America’s oil sector, was stepping down and being replaced by an interim CEO, Gregg Vernon.

    The company said bad weather in Colombia, which suffered through months of torrential rains late last year, could have played a partial role in the fact that the capacity numbers didn’t end up matching with the actual production. But no clear reason was given for why the difference in the numbers was so large.

    Officials at Alange in Bogota weren’t available for comment.

    In addition to announcing the departure of Giusti, who once presided over Venezuela’s state oil firm, Petroleos de Venezuela, or PDVSA, Alange also announced other restructuring plans in a bid to restore investor confidence. It said there would be a $50 million recapitalization, $22 million of which is for debt repayments and the other $28 million to support exploration.

    It also transferred operations of the Topoyaco oil block in Colombia to Pacific Rubiales Energy (PRE.T), a larger, more experienced Canadian oil firm whose main assets are also in Colombia.

    Some analysts say Alange had little choice but to do what it did, while others say the firm seemed to show little concern for shareholders.

    “It was a difficult financial situation for Alange, compromising future exploration activities,” said Medellin, Colombia, brokerage Interbolsa in a report to clients Thursday. “Probably an acquisition from a bigger and well-financed oil company would have yielded better terms than this deal.”

    The brokerage added, however, that “the deal is a way to extend the life of the company, betting on … exploration success.”

    That’s what Jennifer Stevenson, manager of the C$63.9 million Dynamic Global Energy Class Fund, is expecting. She participated in Alange’s share offering that the company did as part of its recapitalization, undeterred by the revision of Alange’s output data.

    “I think the (offering) was a good opportunity to get in at a good (price) level,” following the cuts to the figures, said Stevenson, who owns three million Alange shares. “The assets are still there and we’re getting” new management with a mandate to streamline and refocus the company.

    Further, she is encouraged that Pacific Rubiales will operate Alange’s Topoyaco asset to take advantage of Pacific Rubiales’ technical expertise in Colombia.

    Colombia Goes For 1 Million Barrels A Day
    While Alange’s exploratory efforts could be damaged by the recent news, the fact that it’s a small company with minimal oil production suggests the scandal won’t have much, if any, impact on Colombia’s overall production targets. Colombia has seen a steady increase in oil production in recent years and is gunning for a record 1 million barrels a day average in 2011.

    Natalia Agudelo, an energy analyst at Celfin Capital in Medellin, said Giusti brought a lot of credibility to the Colombian oil sector. Although he is no longer the CEO of Alange, the fact that he remains on the board should keep the confidence level relatively high.

    Still, Colombia has a bigger problem when it comes to attaining its 1 million barrels-a-day goal, Agudelo said.

    “We have the capacity to produce 1 million barrels a day this year, but I’m reluctant to say we will attain that due to a lack of infrastructure needed to transport the oil for export,” she said.

    Agudelo said the country’s pipelines are already at capacity and trucking contracts have reached their maximum potential.

    Colombia last year averaged 785,000 barrels a day, its highest output since 1999. December output averaged 825,000 barrels a day.

    Officials from Colombia’s state-run oil company Ecopetrol SA (EC, ECOPETROL.BO) weren’t available for comment on the Alange case, nor were officials available from the Colombian government’s oil-licensing agency ANH.

    -By Dan Molinski, Dow Jones Newswires; 57-310-867-6542; dan.molinski@dowjones.com

  2. El rojo

    Me thinks some fund managers are beholden to the Sunk Cost Fallacy.

    On the other hand, the COS (chance of success) drilling in Colombia is relatively high. Actually, it is off the charts compared to wild-cat drilling elsewhere but the targets are on average modest-sized. The market might be factoring in a robust resale value for Alange Energy’s assets in the event new management does not work out.

    CEO, president and former Petrominerales exploration geologist Paul Krosho was just dismissed at Petroamerica (PTA.v). Interesting.

  3. sapitosetty Post author

    Just to be clear, the statement says Kroshko resigned, not that he was dismissed. And that they hired Nelson Navarrette as CEO and President — a negotiation that was most likely going on for a while, as he’s a bit of a catch. Without knowing much about the company, I’d say it’s possible — and this is just a guess — that the board wanted to put Navarrette in charge and Kroshko didn’t want to work for anyone. Still, given the recent news in the neighborhood, one can’t help but ask

    1. westslope

      Agreed. I did liberally interpret the news, and furnished a nasty guess. My bad. Plausible guess wrt to working arrangements.

      Incidentally, if you were out in the middle of a large, choppy lake sitting in a canoe along with a bunch of folks sitting in a dozen other canoes, and one of the canoes just took on a few dozen litres of water, would you check to make sure that y0ur canoe was seaworthy?

    1. westslope

      “The government”?

      Oh, the Venezuelan government!?!! I get it. Didn’t think I observed too much gleeful hand-rubbing in the piece.

      Thanks for sharing.

  4. jau

    I just bought Alange shares….
    First time enter at 0.35 and sold at 0.70, now I am going in at 0.31
    let it roll!!!!!!!!

  5. westslope

    jau, Good luck with actively trading Alange Energy. The assets are there.

    However, if somebody were to place a shiny dollar in my hand and suggest I buy Alange Energy, I would respond that there are 1/2 dozen other Colombian junior explorers that I would prefer to buy over Alange Energy based on perceived risk-return.

    Of course, in 5 years from, a person could look back and easily see how throwing investment darts at any Colombian junior oil company producing over 1,000 barrels of oil-equivalent per day (boe/d) would have produced stellar returns (anything in excess of 20% compounded annually).

  6. Jordan Farzier

    The Alange Energy controversie certainly has calmed down a bit since last week, esecially since the Dow Jones newswire covered its misguidance rather casually. I hope we didnt back the wrong guy here and that Alange prevails. What does it take to get a stock price at one buck a share???????

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