November 04, 2009 10:39 ET

Circumpacific Energy Corporation: Press Release

CALGARY, ALBERTA--(Marketwire - Nov. 4, 2009) - Circumpacific Energy Corporation (TSX VENTURE:CER) ('Circumpacific') is an independent oil and natural gas producer engaged in the acquisition, exploration, production and development of oil and natural gas properties in North America.

"Former executive chairman of oil and gas explorer Drillsearch Energy Limited (ASX:DLS), Peter Simpson, may be a difficult man to budge. He is also a difficult man to shove, and with good reason" says Circumpacific Chairman, Roger Tidmarsh.

Since announcing his resignation as a director of Drillsearch at the company's general meeting on 10 June this year, Simpson has been under relentless pressure from Drillsearch to stand aside as a director and CEO of Canadian oil and natural gas producer, Circumpacific Energy Corporation (TSX VENTURE:CER).

The reason? Drillsearch owns about 79% of Circumpacific and wants absolute control of the board. Simpson, Paul Johns and myself, have refused to push off. Our rebuff prompted Drillsearch to requisition a shareholders meeting to be held on 26 November 2009 to spill the board.

"The Circumpacific board was elected by shareholders to manage and supervise the affairs of the company" says Simpson. "It is mandatory under Canadian law and the company's governing rules. The board won't be browbeaten into resigning early at the whim of one shareholder to suit its own commercial objectives".

Drillsearch is the largest shareholder, but there are over 220 other shareholders in total and the board represents all of them, not just one.

Simpson questions the motives behind Drillsearch's calling of a general meeting to oust the three directors. "We found it puzzling. Drillsearch is fully aware that all board positions are automatically vacated and up for re-election at the AGM in November anyway. I suspect Drillsearch wanted to intimidate the board and senior management. Circumpacific called its AGM for the same date as the meeting requisitioned by Drillsearch to avoid unnecessary waste of costs and resources, and shareholder confusion that would have resulted from calling two separate shareholder meetings to be held within a few weeks of each other".

Not content with that, Drillsearch then demanded that Circumpacific's board enter into a binding set of onerous "protocols" that would have restricted the company's business activities. "The protocols demanded by Drillsearch were unbelievable" remarks Simpson. "Drillsearch insisted that we provide them with all materials relating to the forthcoming general meeting for their pre-approval before we disclosed that material to other shareholders. They also wanted the right to pre-approve the script of the chairman, and to bring along 15 representatives to the general meeting. They told us we must agree not to apply to a court or regulatory authority without giving them a week's prior notice. There were about a dozen similar demands."

"It was out of the dark ages and smacked of paranoia. We spoke to our Canadian lawyers and concluded that the extraordinary demands were contrary to basic tenets of Canadian company laws. It would have been wholly inappropriate for the board to agree to them."

The refusal by Circumpacific to agree to those protocols is one of the issues to be agitated by Drillsearch in proceedings brought last month in the Canadian courts. Circumpacific's position is set out in its Statement of Defence which was filed with the Court and is available on the Circumpacific website:

Simpson is not bothered about the media publicity targeted at him in Australia, but interestingly enough he has not been targeted in Canada, the home of Circumpacific and its shareholders. "Drillsearch has a clear agenda and a motive to excite bad press about me", he says. "Drillsearch wants to get its hands on Circumpacific's assets through the back door, including its cash reserves, and to control the board for its own commercial objectives. If Drillsearch really wants absolute control, then why not come in the front door and make a fair Drillsearch script bid to the shareholders for 100% of Circumpacific?"

Simpson points out that Drillsearch is "pretty quick to report the positive results at Circumpacific as if it owns 100% of the company. Even Drillsearch's June 2009 quarterly report announces the cash position of Circumpacific as if it is part of Drillsearch's own asset base. It is not. There are several hundred shareholders in Circumpacific who rightly expect those cash reserves to be applied for the benefit of Circumpacific, not Drillsearch. I think any honest, reasonable person would understand why the Circumpacific board could not lie down on these issues."

Simpson expresses concern that the three replacement directors put forward in Drillsearch's requisition happen to be Drillsearch's managing director, its chief operating officer, and its chairman. "Our own chairman pointed out in August 2009 that the proposed replacement of the board with Drillsearch's executive nominees would not be in the best interests of Circumpacific and its shareholders as a whole, and that Drillsearch's crusade to eliminate Circumpacific's independent directors is 'regrettable'. Canadian law requires that there should be at least two independent directors on the Circumpacific board but Drillsearch's requisition does not appear to recognise that".

Simpson is still hopeful that sensible heads will prevail. "Circumpacific is not interested in litigation. We would rather focus on core business and returning value to all shareholders as we have done since this board was appointed".

A copy of this press release and other relevant material, is available on SEDAR at or the Company's website

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

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