Recently, I was asked to look into Allegheny Natural Resources. Allegheny had a program open last year and raised a bit less than $1 million. Allegheny told investors that they would be drilling between 4 and 6 natural gas wells in the Appalachian Basin, specifically in Pennsylvania. Apparently, that was the last communication with investors, thus the call to me.
Allegheny has pulled only one permit in 2011 in Pennsylvania. The company has not applied for a permit in West Virginia and is not listed as a licensed operator in New York or Ohio. The company is also the target of an involuntary Chapter 7 filing by three entities. The syndicator has made claims that the state of Pennsylvania has recently issued regulation restricting disposal of well cuttings (Which I have not been able to corroborate) and that his well permits won't show because they are such shallow wells (unlikely). The program looks to be in serious trouble.
Is there anything that indicated that the syndicator would disappoint? I read some of the materials related to the due diligence of the offering and asked a few questions of some people that would have some knowledge. The one red flag that showed up was that financial statements had been requested and promised, but that several deadlines passed without the financials being produced. There may have been other issues, but I heard this from enough people to know that something was going on last fall.
I haven't yet put together my Ten Commandments of Due Diligence, but this is certain to be on the list: Thou Shalt Receive All Information Promised. And that goes double for financial statements. Client funds are too important to trust to a firm that does not keep orderly financial records...or its promises.
No comments:
Post a Comment