Alange (ALE.v) owns up to errors

Alange Energy has finished its internal review and says it found problems. Here’s a bit of the key stuff, but if you’re really into this story, you would do well to block out a half hour in a quiet room and read the whole, epic, thing:

the Internal Review found that:

1. the Company did not maintain effective operational control to determine its production;

2. the Company did not maintain adequate controls over lines of communication between operational staff and management to assist in managing cash flow and to obtain a full understanding of the Company’s current working capital position;

3. the Company did not maintain adequate controls for the reliable sharing of information between the operational staff and finance staff;

4. the Company did not maintain effective controls to ensure that material sales of assets of the Company are subject to a formal approval process;

5. the Company did not maintain effective procedures with respect to competitive awarding of contracts to ensure the proper approval and documentation of significant contracts; and

6. the Company did not maintain adequate controls over the timely communication between departments of information relating to issues that may impact the Company’s financial reporting.

I find it interesting to see that the board is saying there may have been problems with asset sales and contracting practices. I had wondered about some of the asset sales and purchases, but never got around to doing the analysis any justice. They don’t say much new about the oil trucking contract they entered into last year, except that it was “more costly” and that it caused them to have a loss from operations. That contract, since terminated, would seem to be worth learning more about — who owns the company that got the contract, how did that contract happen, you know what I mean. Could all be innocent, or not.

But I don’t expect anything of the sort. As I’ve mentioned before, Alange was the most active oil and gas stock on the Toronto Venture exchange last year, and was second only to Suncor as the most active Canadian oil and gas stock, period. But the press, both in Colombia and the international financial wires, just say, nah, not our problem. They are happy to write up a little CEO interview, but they lack either time or ability to read and understand financial filings.

All of which is a long way of saying, don’t count on anyone to do your due diligence. Companies get things wrong all the time. Don’t expect anyone to catch the error.

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6 thoughts on “Alange (ALE.v) owns up to errors

  1. A004

    I wonder if any of the findings apply to ALE’s big brother, PRE. So many similarities it is just unreasonable not to consider it, even as a remote scenario. The only difference is that with a bit of makeup PRE can hide stuff from the market way more easily than ALE!

  2. jau

    Bottom line is: Alange will have to find a company to take them over cause that name has been through the mud one too many times… If we could find somebody to pay up to 50 and 60 cents a share, I will be a very happy camper.

    Guisti and co, well lets say that I will be recommending them ever again.

  3. westslope

    OK, OK. Watch the confirmatory bias here……

    After all, it could very well be Pacific Rubiales that buys out Alange Energy and saves a bunch of shareholders who overlooked x, y, and z.

    But that is not what my caribou shoulder blades tell me. No. I’ll bet Alange Energy builds at least 10k boe/d before any whiff of a buy-0ut or merger. It is a question of pride and collective dignity. The two co-chairs of Pacific Rubiales now sit on the Alange board and own a chunk of shares recently bought in the market. That is a powerful signal of this community’s confidence in Alange Energy’s future.

    Alange Energy will survive and at some price–probably lower than today’s share price–will be a compelling buy.

    1. jau

      well that is the other good scenario, which is even better than mine…

      I think Alange assets are too good therefore whoever owns them thrives

  4. westslope

    Yes, the assets are enticing. No doubt.

    On the subject of merger and acquistion (M&A) activity, if the boom in the upstream oil sector continues, services and transportation for new barrels may become increasingly expensive. In that respect, well-established early movers with solid operational Colombian teams and sold balance sheets will enjoy an advantage compared to recent entrants.

    Add to increased drilling and service costs, a presumed reduced probability of success (POS) both geological and commercial, and the window for putting junior explorers on a sustainable cash flow growth path shrinks. A few will make it. Most will initiate a “search for strategic alternatives” if they don’t sell earlier. There should be good opportunities for arbitrage specialists who know how to measure and assess upstream oil & gas assets.

    Capitalism works. Colombian oil & natural gas production will continue growing. A richer, more powerful Colombian state will continue to improve security and initiate substantial infrastructure investments. The unleashed productive potential of Colombian workers will continue to propel growth in material living standards.

    One day, Colombian will erect plaques to commemorate the contribution of Canadian and Venezuelan oil workers to a critical stage of nation building in Colombia’s modern history.

    Off my soap box.

    «¡Yo creo en la justicia y la esperanza!» -Pedro Casaldagila.

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