Cano Petroleum Prevails in Lawsuit over Disclosure Statement

Skadden secured a victory for client Cano Petroleum Inc. in a putative securities class action that alleged the company made misleading claims in a 2008 share offering's disclosure statement. Judge John McBryde of the U.S. District Court for the Northern District of Texas dismissed the lawsuit on December 3, finding that the plaintiff, Truk International Fund, failed to state a claim. He also denied the plaintiff leave to amend the claim.

Truk had asserted that in the statement, Cano had overstated the estimated quantity of recoverable oil and gas reserves that are core to its business, and that a later announcement that the reserves had declined caused the stock price to drop. But in his ruling, Judge McBryde said estimates about the reserves were in fact disclosed and included adequate cautionary statements. "The cautionary statements in the Offering Documents made clear that the proved reserve numbers stated in the documents were estimates as of June 30, 2007, and that a large number of factors could cause the estimates to be lower if recalculated as of the date of the offering," Judge McBryde wrote in his opinion.