Todd
Corporation took Greymouth Gas to the High Court chasing access to accounting
records in a dispute over royalties payable on a Taranaki project. There are suspicions Greymouth is padding
expenses recoverable before royalties are payable.
Todd subsidiary, GXL Royalties, joined with oil
and gas competitor Greymouth Gas in the commercial exploitation of a Taranaki
prospect. GXL gets five per cent of the
“output value” after Greymouth Gas has recovered its intitial investment. GXL is entitled to have an independent
auditor verify claimed initial investment costs.
The High Court was told Greymouth calculated these
costs at $45.6 million. In 2013, after a
fruitless two years attempting to complete the audit, Ernst & Young told
GXL it was refused access to supporting documentation covering major components
of these costs. The auditors flagged the
appropriateness of $14.6 million claimed to be incurred by the permit operator,
a US-controlled company called Swift Energy, and the amount of $16.51 million claimed
spent on drilling rigs supplied by Greymouth Gas related companies.
Ernst & Young was refused access to the
primary accounting records. GXL is suing
Greymouth, alleging the auditor was misled.
Justice Gilbert ordered access.
The royalty agreement did not state that Greymouth’s accounting records
for the initial investment were confidential.
Access is necessary to complete the audit envisaged by the parties
earlier royalty agreement, he said.
GXL
Royalties Ltd v. Greymouth Gas – High Court (20.5.15)
15.054