Delta Petroleum officers, directors under fire in shareholder lawsuit

By Caroline Salls

Pittsburgh, May 8 - A federal securities class action lawsuit has been filed against some of Delta Petroleum Corp.'s officers and directors on behalf of investors who purchased the company's shares between Nov. 9, 2010 and Nov. 9, 2011, according to a news release from shareholder rights firm Robbins Umeda LLP.

According to a separate news release, the class action suit was filed in the U.S. District Court for the District of Colorado by Denver law firm Dyer & Berens LLP.

The officers and directors named as defendants in the lawsuit include Delta Petroleum chairman of the board Daniel J. Taylor, chief executive officer Carl E. Lakey and chief financial officer Kevin K. Nanke, according to the complaint.

Robbins Umeda said the complaint alleges that the defendants issued materially false and misleading statements regarding the company's business, operations and future prospects during the year in question.

In particular, the firm said the complaint alleges that defendants misrepresented and/or failed to disclose that Delta Petroleum was not adequately reserving for its "dry hole costs and impairments" in violation of Generally Accepted Accounting Principles, causing its financial results to be materially misstated; that Delta Petroleum's unproductive assets would hinder its ability to find a buyer for itself or its assets, as the value of the company's assets was less than the value of its total debt; and that the company had far greater exposure to liquidity concerns than it had previously disclosed.

According to the release, Delta Petroleum reported a net loss of $429.4 million, or $15.40 diluted earnings per share, for the quarter ended Sept. 30, 2011, primarily as a result of costs associated with drilling dry holes.

Robbins Umeda said the company also provided an update on its strategic alternatives process, advising that it had not received any offers to purchase Delta Petroleum or its assets.

As a result, Delta Petroleum said it would be forced to restructure its debt or file for bankruptcy if the restructuring was unsuccessful.

On this news, the law firm said Delta Petroleum stock collapsed $1.34 per share to close at $0.71 per share on Nov. 10, 2011, representing a one-day decline of 65% on volume of nearly 4.5 million shares.

Delta Petroleum, a Denver-based oil and gas exploration and development company, filed for bankruptcy on Dec. 15 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 11-14006.

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