The Texas Securities Commission issued an emergency cease-and-desist order late Wednesday against a Fort Worth oil executive for allegedly providing misleading and incomplete information to potential investors about so-called “offset wells.”
State Securities Commissioner Travis Iles said the agency has ordered Woodland Resources Operations Director Michael E. Patman and two other officials at the Fort Worth-based company to stop any fundraising efforts immediately.
Documents show that Patman promised potential investors annualized returns of up to 70% on his oil wells and “touted his decades of earning profits for investors through oil and gas drilling programs.”
Patman has not, however, informed investors about his “gusher of debt and a long trail of misleading investors” or the fact that he “helmed two companies that went into bankruptcy and he owed millions of dollars to investors who successfully sued him for fraud.” A bankruptcy judge stated that Patman was “either incompetent” or guilty of mismanagement.
Efforts to reach Patman by phone and by email were unsuccessful.
Texas Securities Commission also included two other company officials, Jeremy “JB” Yowell and Brett Kroh, in the cease-and-desist order.
Woodland Resources, according to the order, sent “unsolicited emails to Texas residents offering investments in an offset well in producing oil wells in Seminole County, Okla.”
“Woodland is selling working interests in direct drilling offsets of a nearby well called Oddfellows A-1,” officials said in an announcement.
Offset well are close to existing producing wells,which sometimes provide insight into how much oil the offset well will produce.
“Woodland Resources is claiming the Oddfellows well produced between 38 and 40 barrels of oil per day as of October 2018,” according to state officials. “Production records, however, show that in the one-year period ended April 2019, Oddfellows produced an average of 19.7 barrels per day, or one-half of Woodland’s claimed total.
“Woodland Resources and its principals,” according to the order, “are telling potential investors that the company is positioned to become a major independent player in the domestic and international oil and gas industry. The company says Patman led one company, Sundance Resources Inc., from start up to revenue of more than $100 million in 2006.”
But state officials said that Woodland and its officials are not disclosing to investors that a federal judge in Dallas ordered Sundance and Patman to pay nearly $13 million in damages to investors who had sued them for fraud and breach of contract.
“The investors, most of whom were retirees, collectively loaned Sundance more than $14 million to purchase drilling rigs,” the Texas Securities Commission stated. “Sundance fell behind on loan repayments and eventually stopped making payments because its executives, including Patman, transferred Sundance assets to company insiders and their affiliated companies.”
Creditors forced Sundance into bankruptcy in 2011. The company owed creditors more than $44 million in claims.