Anadarko Faces Shareholder Suit After Fatal Gas Explosion
By Michael Phillis Law360, New York (May 4, 2017, 2:42 PM EDT) --
A shareholder suit filed in Texas federal court on Wednesday alleges that Anadarko Petroleum Corp. lied about safety risks in its public filings prior to a fatal gas explosion that demolished a home in Colorado, arguing the company's false disclosures cost investors money.
Anadarko made public statements that it was in compliance with existing safety regulations but failed to disclose key information about some of its vertical wells that were allegedly at increased risk of explosion, according to the suit brought by named plaintiff Robert Edgar. The "materially false" statements about its positive safety approach allowed the company's stock price to remain artificially high until the days and weeks following April 17, when two people were killed in a Colorado home explosion caused by a faulty gas line.
The putative class action seeks damages for investor losses.
"As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of Anadarko securities was artificially inflated through the class period," the complaint said. "In ignorance of the adverse facts concerning Anadarko's business and financial condition, which were concealed by defendants, plaintiff and the other members of the class purchased or otherwise acquired Anadarko securities at artificially inflated prices and relied upon the price of the securities, the integrity of the market for the securities and/or upon statements disseminated by defendants, and were damaged thereby."
The suit defines the putative class as anyone who purchased or acquired Anadarko securities between Feb. 17, 2016, and May 2, 2017.
The suit documents company statements and earnings from Anadarko's public filings prior to the April 17 house explosion. Almost 10 days after the explosion, news broke that Anadarko was shutting down 3,000 vertical wells in Colorado. After the well closures, the suit records the first of two stock drops at the center of this complaint: shares fell 4.7 percent to $57.12 on April 26.
Then the Firestone, Colorado, Police Department and the Colorado Bureau of Investigation released their conclusions on May 2 about the cause of the explosion. They decided the explosion was linked to a faulty gas line connected to an old well owned by Anadarko.
"Officials stated that the gas line had been abandoned, but not disconnected from the wellhead and sealed at both ends," the suit says. "Consequently, the line only stopped leaking gas after Anadarko shut down 3,000 wells in the region following the explosion."
The cause of the explosion came out on Tuesday. On Wednesday, the share price dropped again, this time by 8.1 percent to close at $51.74.
"As a result of defendants' wrongful acts and omissions, and the precipitous decline in the market value of the company's securities, plaintiff and other class members have suffered significant losses and damages," the complaint said.
The explosion occurred in a residential neighborhood in Firestone, a town about 30 miles north of Denver. Video of the incident's aftermath showed that no part of the house survived the gas explosion. In place of the home, the basement and surrounding land was littered with charred, unrecognizable debris.
Al Walker, Anadarko chairman, president and CEO, said on May 2 that he was deeply saddened by the accident.
"The safety of our employees and the people who live and work in the communities in which we operate is our No. 1 priority. Consistent with that, and out of an abundance of caution, last week we shut in our vertical wells in the Oak Meadows area and throughout the basin. We hope that doing so also provided some additional reassurance to the community in the wake of this tragic accident," Walker's statement said. "We will continue to take all necessary and appropriate steps in that regard, and will continue to cooperate fully with all ongoing investigations to ensure we fully understand the basis for the fire district's conclusions and that no stone is left unturned prior to any final determinations."
Representatives for both sides did not return a request for comment.
Counsel information was not available Thursday for Anadarko.
The plaintiffs are represented by Willie C. Briscoe of the Briscoe Law Firm PLLC and Jeremy A. Lieberman, J. Alexander Hood II, Hui M. Chang and Patrick V. Dahlstrom of Pomerantz LLP and Peretz Bronstein of Bronstein Gewirtz & Grossman LLC.
The case is Robert Edgar et al. v. Anadarko Petroleum Corp. et al., case number 4:17-cv-1372, in the U.S. District Court for the Southern District of Texas, Houston Division.