Exclusive: Gulfport Energy ex-chairman received millions in free equity

Tue Sep 24, 2013 7:34am EDT
 
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By Brian Grow and Anna Driver

(Reuters) - Gulfport Energy Corp (GPOR.O: Quote), a publicly-traded oil and gas company based in Oklahoma City, allowed its former chairman to receive millions of dollars in equity interests at no cost in more than a dozen firms that have done business with Gulfport.

The equity stakes awarded to Mike Liddell, who stepped down as Gulfport chairman in June, were granted by Wexford Capital LP as part of an uncommon arrangement. While working for Gulfport, Liddell also served as an advisor for energy investments by Wexford, a $4.3 billion Connecticut investment firm.

In response to questions from Reuters about Liddell's dual roles, Gulfport said all "material terms" of Liddell's equity stakes had been disclosed to the U.S. Securities and Exchange Commission.

Gulfport appears to be in compliance with SEC disclosure requirements, said three corporate-governance specialists who reviewed Gulfport's SEC filings and its responses to Reuters.

The stakes awarded to Liddell in companies that do business with Gulfport could nonetheless create the risk of a conflict of interest, the governance specialists said, because the deals could benefit Liddell at the expense of Gulfport shareholders. They said the company could have provided a fuller understanding of the relationship between Liddell and the Connecticut investment firm.

Gulfport said it "regularly solicits bids" from independent providers of oil-field services and other vendors, in addition to bids from firms in which Liddell owns a stake. "Because of the competitive bidding process … and the oversight of our audit committee, Gulfport believes its decisions are always in the best interest of its stockholders," the company said in a statement.

In written responses, Charles Davidson, Wexford's co-founder and chief investment officer, said Liddell's equity interests were "compensation for services rendered." Gulfport's business deals with Wexford companies in which Liddell owns an interest are "normal arms-length transactions," he said.

The SEC's rules on so-called related-party transactions address only deals between officers, directors and the company that employs them. The regulations don't compel disclosure of transactions with outside entities. They do require companies to provide "other information" that is "material to investors." Companies have discretion to determine what's considered material.   Continued...

 
A general view of the headquarters of Gulfport Energy Corporation is seen in Oklahoma City May 14, 2013. REUTERS/Brian Grow