A government appointed inspector has begun an investigation to establish the ownership of certain shares in the publicly quoted oil exploration company Bula Resources. Barrister, Mr Lydon McCann, was appointed by the Tanaiste and Minister for Trade, Enterprise and Employment, Ms Harney, to establish the identity of the beneficial owners of Bula shares which were held by Mir Oil Developments up to November 1996 and by Chamonix Nominees since then.
Mr McCann's brief includes establishing the beneficial ownership of Bula shares held by Pictet International Management before February 1997.
He is to report within three months. Ms Harney has undertaken to publish the results of the investigation.
The latest development in the long running Bula saga follows the company's stormy annual general meeting last August when angry shareholders wanted the Fraud Squad called in to find out how the company had lost over £15 million in Russia.
They wanted to know who was responsible for a falsified report on the oil field in Siberia in which Bula has a stake and why the company directors did not know the true ownership of the company involved in developing the oil field. Bula has thousands of small Irish shareholders who have seen the price of their shares fall from 2 1/2p at the beginning of the year 1 5/8p now.
The latest development follows the successful application by the company to the High Court in September to have 74 million Bula shares frozen while the company investigated who owned them.
In that case counsel for Bula told the court that there had been suggestions that it's chairman and chief executive Mr Jim Stanley may have had an interest in a company which got the Bula shares in return for a 50 per cent share of an oil field in Siberia. Bula managing director, Mr Pat Mahony, last night welcomed the appointment and said he would "work 100 per cent with the inspector in the pursuit of his investigation into the ownership of the shares".
Mr Mahony said that Bula was already carrying out its own investigation. "The appointment of the inspector will be a help to Bula. He will have more resources and the power to get results quicker than we could," he said.
Ms Harney said that she had been concerned since the August annual general meeting "about a variety of issues relating to the ownership and disposal of Bula Resources shareholdings. My Department and the Irish Stock Exchange have been making enquiries of Bula and others about the beneficial ownership of certain Bula shares and about certain press statements made on the company's behalf since October 1996".
Mr McCann's appointment under Section 14 of the Companies Act follows unsuccessful attempts by Bula in recent months to establish who owns the shares which were issued to Mir Oil in a deal arranged by Mr Jim Stanley.
In that deal, in August 1995, Bula issued 101.5 million shares to Mir Oil Development, a company registered in the British Virgin Islands, in return for a 25 per cent stake in another British Virgin Island company Mir Space International.
Bula also got a four year option to buy the remaining 75 per cent of Mir Space.
Mir Space was a wholly owned subsidiary of Mir Oil before the deal. The registered shareholder of Mir Oil was a Jersey-based company, Chamonix Chartered Secretaries. The sole asset of Mir Space was its rights to half of the Salymskoye oil field in western Siberia.
As part of the due diligence before the deal was completed, Chamonix informed Bula that the beneficial owner of Mir Oil was Mr Charles Ellis who was based in South Africa. But in August Bula was informed that Mr Ellis was not and had not been for some time the beneficial owned of Mir. Mr Stanley stated in writing that neither he or any member of his family had an interest in Mir Oil or Mir Space. Following the deal Bula spent millions of pounds developing the Salymskoye oil field - it was being jointly developed by Mir Space and a Russian company, KMG. In October 1996, the Irish publicly quoted company announced encouraging results from a test well, claiming that it could produce 942 barrels per day.
In February 1997, Mir Oil told Bula that it had sold 27.8 million of its 101.5 million shares. The sale caused concern among Bula shareholders and market analysts. Later that month technical experts at Bula told company directors that the potential output from the Siberian oil field would be significantly less than the 942 barrels per day announced the previous October. When this information was announced on March 5th the Bula share price dropped. On April 14th Mr Jim Stanley resigned as chief executive and chairman of Bula. Last months Bula went to court to freeze the sale of any more of the shares held by Mir pending the establishment of who owned the shares. The High Court heard how Bula director Mr Pat Mahony was told last May by Mr Bogatchev from KMG that he had negotiated with Mr Stanley on the development of the oil field since early 1995 and had at all times thought he was dealing with Bula. He told Mr Mahony that Mr Stanley had introduced Mir Space as the entity with which he required KMG to make the agreement. KMG understood that Mir Space was an offshore subsidiary of Bula, Mr Bogatchev said.
