Black Dragon has announced that its agreement with Kingdom Energy Partners (KEP) on the previously announced participation in the Humble Project on September 9, 2009 has been terminated by mutual agreement. Because of Black Dragon CEO's one-third interest in KEP, certain shareholders of Black Dragon raised issues about a possible conflict of interest. While full disclosure was made by Dr. Bailey to all parties regarding the potential conflict, in order to avoid any questions, both parties believed that it was appropriate to terminate the arrangement at this time. Counsel for the Company had opined that based on the facts presented, there appeared to be no violation of Delaware Law, based upon the absence of any special benefit to either party.
However, there had been some negative pressure on KEP and Dragon from Black Dragon Stockholders about the possible conflict of interest, in light of Black Dragon CEO's executive position in both companies. This original KEP agreement was reached through the mutual contacts the CEO has in each entity and the Black Dragon Board was aware of this connection. Dr. Bailey was to receive no special benefit from the arrangement, but rather believed it was a good economic decision for Dragon that would otherwise not have been available. However, in the best interest of all, KEP has advised it preferred not to go forward with the deal with Black Dragon.
Dr. Bailey commented that although this deal was a potentially attractive arrangement, it is not the only avenue for the Company to continue to grow and attention will be turned to finding other attractive projects for the Company's participation. "The primary effort now," Dr. Bailey stated, "will be to get Black Dragon's own wells drilled on the announced 640-acre lease in Caddo Parish and to continue with internal cost reduction measures." All well permits have been received from the State and this drilling program is underway.
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