Prospera Energy (PEI.V)’s big corporate evolution: From incompetence to dishonesty

Every junior markets public company goes through an evolution or five in the first few years of their life. It’s natural. Any time you’re expected to get from ‘adventurous idea’ to profit quickly, with a daily scorecard on your back and short sellers and day traders and brokers rummaging through your pockets any tme you ask for a little financing, and shareholders tapping the desk impatiently, you’re going to get in situations where there’s a tendency to start acting like it’s every man for themselves.

I prefer not to do business that way and, on occasion, it costs me.

My tendency to trust people occasionally puts me in a position where assholes take advantage of my faith in them.

My business, for the last ten years or so, has been mostly focused on finding companies that have been through this gauntlet – they’re a little beaten up, learned their lessons, and now need some help telling the world how it went wrong and how they’re going to fix it.

That’s a pretty profitable gig for me, not gonna lie, because I’m really good at it, I’m honest, and I’m flexible. But when it works out, and the company tells their story well and shows their work and does what they promised and shareholders lock in, EVERYONE wins.

As a journalist first, marketing guy distant second, that’s my preferred outcome. I tell companies when they sign up with me that, if they just want me to say nice things about them, there are plenty of assholes out there who’ll take their cheque and say whatever they’re told to, and that formula will always work out poorly in the long run.

In the Canadian public markets, honesty is a marketing niche, but it’s also the only way to actually build a company for the long haul.

Take your lumps. Admit your mistakes. Explain them fully. Show your work in correcting them. Then lay out your new plan.

Over a decade, this has been my business model. It’s why I’m still here, while the bodies of many of my competitors have floated by with monotonous regularity. I’ve never had to apologize for or retract a story because I write what I know to be true, or at least what I’ve been sold as true, and if there’s a disconnect between the promise and reality, I’ll usually be the one to point it out.

This is why, often, when it’s announced that I’ll be working with a company, the share price goes up. In agreeing to work with me, you’re telling the world that you’re okay with a journalist being in the boardroom.

Nothing to hide? Great.

So when Prospera Energy (PEI.V) came to me looking for help this summer, I laid out that plan as I always do; Tell me what you screwed up with, tell me how you’re going to fix it, and I’ll help you tell that story to an understanding audience.

Actually, Prospera first came to me in November 2023, but the answer to the ‘can you stand behind your promises’ question at that point was, it appeared, no.

It wasn’t until July of 2024 that Prospera was ready to commit to the program. because they had a lot of shit to deal with and it wasn’t going well.

NOTE: What’s going to follow is a very behind-the-scenes look at how Prospera behaved over my year of being involved with them, six months of which was as a service provider. I wouldn’t normally go behind the curtain on a client like this as an industry professional but, as you’ll come to read, Prospera has a new management team that wants to tell the world they’re super competent, and actually press released that they’d ‘renegotiated’ a ton of service provider contracts, like that’s a good thing.

What they mean by that is, they’ve told people they owe money to that they won’t be paying up.

I’m one of those people.

When I submitted my invoice this past month and asked to be paid what they owed, I got a call from their IR guy offering to ‘buy out’ the contract at a lesser amount (50% off). I said I was open to the discussion, and also offered them a smaller ‘pause fee’ if they needed time to pay up and would like to continue the work at a later date.

I’ve been known to let client companies pause their program for as long as a year previously, because sometimes they just need a little help to get squared away. We’re all in this together and, as long as the company is dealing in good faith, we can usually figure it out.

A day later, I received this note:

After thorough review by our management and legal teams, it has been decided to proceed with terminating the agreement between Equity Guru and Prospera Energy. This decision is based on the following clause within the agreement:

“The Company has the right to terminate the Agreement at any point in time for any reason, with the agreement that they will be waiving any and all pro-rated refunds. The Agreement shall then be deemed completely terminated and all Parties shall be relieved of all obligations (post-expiration obligations or otherwise) that may have existed under the Agreement.”

In light of this clause, the company will waive any pro-rated refunds for payments made to date, and the agreement will be considered fully terminated.

While this is not the outcome we had hoped for when we initiated this partnership, I sincerely hope we can maintain a positive working relationship and explore potential collaborations in the future.

When I pointed out they owed me for four of the six months of the contract already passed, they demanded an itemized list of the work done then, when they got it, offered 5c on the dollar and said I had 48 hours to accept.

I had a better idea. Quoting my response back:

The problem is, the contract wording you’re using to attempt to get out of the remaining contract does not allow you to back date money that you already owe me.

That this isn’t a poorly worded and misguided misstep, but seemingly an attempt by the new board, in conjunction with your legal team, to find a way to stiff me and run out on your debt, lands very poorly with me as an intentionally aggressive and unprofessional move. The mealy mouthed talk of potential future collaborations if I agree to take it on the chin only adds to the offense.

It leaves me with two options.

The first is to pursue this legally which will take time and money from both the sides, and require your company to press release the resulting action, negatively impacting your market cap. I’ll win, but at a mutually disappointing cost in time, money, and energy.

The second option, which I historically prefer, is that I simply continue writing about your company without the previous limitations of confidentiality and editorial approval in the seemingly now dishonoured contract.

So buckle in. I’m about to make Prospera management famous.

The story Prospera wanted to tell was complex. Previous management had fucked the company up hard. Their oil and gas wells were a mess, with many non compliances, poor or non existent maintenance, a ton of them underperforming,  and while the company had previously raised money and laid out a plan, it had taken several years to get their act together and, at the end of it all, said act was most assuredly not together.

So a new CEO, Samuel David, took over, and he’d given himself some reputational buffer by telling shareholders (through a corporate update ghost written by Keith Schaefer, at no small expense) that the old regime sucked and screwed everything up, and they just had to be patient while the new guy fixed this thing.

So the shareholders, hoping for a hero, had done exactly that.  They’d held, waited, even bought more stock, looking to finally get their investment going.

But over time it turned out the new CEO was much like the old one. He hadn’t been able to perform miracles, he needed more time, and he was running out fast. The shareholders were turning on him. Messageboards and social media were aflame with abuse, and his team privately admitted that he was unorganized, hard to nail down, and likely to miss his promised targets.

Better results would come later in the year, they said, but in the meantime the company needed to put out a corporate update, to explain everything that was going on, soup to nuts, to the angry investors.

And they wanted me to write it.

Of all the folks in the market awareness game, I’m actually super well-positioned to do something like this, even though – to be clear – writing as the CEO is not my normal gig. Ghostwriting isn’t in the contract, but the IR team and I talked it over and they said, and I quote, “It’s a shitshow here, we really need someone to bring a clear messsage, and having an experienced communicator, a veteran journalist, on board is exactly what we need.”

So they asked me specifically NOT to cover the company on my platform as per normal, as was laid out in our signed contract, at least until they’d had a chance to get their corporate update out and set the tone going forward.

Alrighty then.

With the first two months of the contract paid as a down payment, I tried to schedule an interview with the CEO and things quickly got weird.

First, the PEI team couldn’t get their CEO scheduled for a 20-minute call in over a month. I got repeated requests for my schedule, which went from specific to “any time,” but the sitdown never came about. They scheduled, rescheduled, cancelled.. for long periods, they couldn’t even find Mr David.

The way I usually do business is, if you’re a client company, you’re paying me for my attention, and there’s a finite amount of that to go around. I can’t write about 35 clients at once so, if I take you on at all, and you drag your feet getting me what I need to work, that’s a you problem – I’ll be over here writing about another client until I’m available again. And if your company is so fucked up that you’d rather I *didn’t* write anything for a bit while you’re paying for my time (it happens), that’s also a you problem.

And you don’t get a refund for you problems.

But eventually there was movement at Prospera. Eventually, what did come my way, on the 24th of July, was the previous update written with Schaefer, a series of bullet points from the CEO, and a Rockstone Research analysis piece by famed frothy over-hyper, Stephan Bogner, and these words:

Key points:

1. Where were we?
2. What have we done?
3. Where are we going?

The bullet points were not so helpful, being as they talked about many things that hadn’t happened yet, and things that happened a while ago that were no longer bragging points (such as the majesty of having taken the stock from 1c to 19c, when it was now back to 6c and falling fast.

I got to work immediately and, within 24 hours, I delivered what I believe to be a 5-star work of honesty and transparency that, had it gone out on behalf of the company, would have been well received by all and sundry.

Here’s a glimpse:

A January 2024 analysts report from Rockstone Research said of Prospera, “Though still flying under the radar for many investors, Prospera Energy Inc. is proving to be a rising star in the oil and gas industry. The restructured company is making waves with its strategic approach to oil production and significant achievements under the leadership team.”
While management appreciates that sentiment, we also know not all of what we’ve worked towards over the last few years has gone as intended, some milestones have been missed, and the multi-year turnaround program we set ourselves on to modernize, streamline, and grow the company has taken longer than initially anticipated.
Management would like to acknowledge that the challenges involved with streamlining, modernizing, and repairing Prospero Energy since we took the wheel in 2021 have not been a straight line. Long term investors have looked on frustrated as we’ve made plans, changed plans out of necessity, learned from mistakes, and worked toward our goal in a slower manner than initially planned.
It is not our intent to hide the scars we’ve accrued in this journey. Missteps are learning opportunities, and we’ve learned a lot over the last few years about our properties, the
company, and what we inherited when we set out to modernize, streamline, and grow Prospera.

RIGHT?

I mean, let’s ignore the “streamlining, modernizing” repetition because, hey, first draft like I said, but if you got that in your inbox, as a shareholder who has been yelling for months for some management clarity, you might be compelled to get a coffee and take a seat for the rest of the read.

How I prefaced it to their IR team:

There’s a lot of mea culpa in there, which may be something you want to tweak based on your comfort levels in where the torches and pitchforks stand.

My take: It’s always better to surprise the crowd that you hear them,acknowledge they have a point, that you’ve clocked your mistakes – some of which are yours and some of which are dumb luck – and that your plan going forward is rock solid.

That presents them with a focus on the buying opportunity, rather than the losses they may have notched so far.

The big questions they’ll have:

• Do you know what went wrong
• Do you acknowledge it went wrong
• What have you learned
• and Can I now make a profit on that

I think all of that is here but you may have things to add that I missed. My tone is also a little more familiar than your corporate voice may be used to, but that’s part of the connection with the crowd – that you dont ivory tower yourselves and instead feel like you’re being frank with the crowd.

Practically speaking, Samuel suggested that we try to include this essence of “turning a corner” in the very first paragraph. The rest of the content, which you have built out nicely, supports the efforts done so far and the challenges that have been overcome. We will likely add an update on the current state of our drilling program and production near the end for a practical update.

Thank you for your patience with us as we have worked to further capture Samuel vision, thoughts and content for this article. This is still being worked on as we speak, but I wanted to share this updated version with you as we have now captured Samuel’s feedback in this content. The pressure is building to want this to go out this week

What followed was a rambling multi-page corporate update monologue, written by the CEO, that was long in technical jargon, excuses, non-existent grammar. more promises, and a commitment that the year end was going to be better. They knew it wasn’t a great document, and I noticed almost all of what I’d written was gone.

ENJOY THE WORDSMITHING, BROS:

In the year-end 2020, Covid amplified Prospera’s futile financial vulnerability from low productivity and high operating cost. The liability was in excess of $24MM ($12MM ARO, $11MM AP arrears, & $1.5MM in Credit Facilities) to secured mezzanine capital, CRA, mineral royalties, municipality property tax, landowners lease payments, numerous local services that performed services, and high asset retirement obligation. Prospera had in excess 400+ non-compliance infraction with spills, dysfunctional monitoring devices, facilities that were neglected and orphaned. Consequently, Prospera Energy Inc. was in terminal position. In early 2021 quarter one, the municipality and secured debt holder exercised their rights and took direction of pay from what little revenue / production there was. The CEO and directors were fleeing from Prospera liability obligations especially to CRA. Nevertheless, Mr. Samuel David accepted as an advisor to rescue Prospera from entering into CCA due to his association with the late Burkhart Franz, founder of Prospera Energy Inc. (formerly Georox resources).
Meanwhile, Mr. David was leading a private company that was developing medium-light oil around the Brooks area.

Scintillating. How do you not buy in at that point, friends? You can see where all the time went. Fuckin’ Shakespeare.

Anyway, it goes without saying that they wanted another draft.

Things were now dire. “We’re not going to hit our year end targets,” I was now told. so the update needed to be out NOW.

I had 24 hours, but I turned in an all-nighter and the red ink was plentiful. We weren’t dealing with art now, nor nuance. I’d given them my best, they’d ignored it and turned around rubbish and made clear that was where they were landing, so all I had left for them was a line edit, so the CEO wouldn’t be completely embarassed by the finished product.

This was not a good document, I told them.

Now, turning around these several-thousand-word articles, with research and storytelling and figuring out which promises were genuine and which should be avoided, and what’s real and what’s fluff, this is not quick work. And doing it after your last few editions had been, apparently, completely tossed out, doesn’t exactly make one feel loved.

Especially when nobody has paid your fucking invoice recently.

I usually interview, analyse, theorize, and tell a story. I make jokes, I paint a picture, I research and figure out ways to make it all easy to understand, but speaking FOR the CEO – that’s a whole new level of research, writing, and approvals, and when said CEO prefers to kick the shit out of his thesaurus rather than just speak straight, and when he won’t show up for a call in over two months, you start to get pissy.

What followed was a month of silence, which also saw my next invoice received and not paid.

There were eventually excuses. I hadn’t filled in a form for the accounting department, they said. They only ran payments at the end of the month, they said. Someone was on vacation, they said, and would get around to it when they were back.

DEADLINE DAY:

When Samuel David’s corporate update finally came out, three months after we first talked about it, it ended him. Within three weeks, he’d resigned, though the news release mentioning it casually ignored his position of CEO and referred to him only as a ‘director’.

Prospera Energy Inc.’s Jasdip Dhaliwal and Samuel David have both resigned from the board of directors for personal reasons, effective immediately. The board expresses its gratitude for their contributions to the company.

IR guy Shawn got quiet. Emails and calls unanswered through November, until I sent another invoice reminder.

Then a call, “Hey man.. do you think it would be possible to buy out the contract?”

By this point the contract was about over, but sure. Let’s get this long personal nightmare over with already.

But the only thing that was over was Prospera’s ‘incomeptence’ era. Now we were about to begin the ‘fuck you if you want to get paid’ era.

New Chairman Shubahm Garg and new CEO Chris Ludtke brought a new plan to Prospera. Instead of honouring ones commitments, they opted for dishonouring them, and framing that as a turnaround.

The devil is in the details; they’re now out of credit, figuring out payment plans and, in the case of at least my company, running out on their bill.

25+ critical vendors have been completely caught up with all accrued account balances brought current and further work being either pre-paid or operating on pre-approved credit arrangements. Extensive discussions with other vendors are ongoing, resulting in agreements with an additional 25+ vendors who have agreed to 3-24 month payment plans, allowing account arrears to be settled within that timeframe.

You know, I might have been open to one of those payment plans, but I’m guessing PEI will run out on those too.

Oh yeah: The stock is currently down to $0.03.

Along those lines:

Prospera Energy Inc. has amended its $11-million promissory note, originally dated July 7, 2024, in collaboration with its principal lender. The principal balance, which was previously increased by $500,000 to $11.5-million, has now been further increased by an additional $700,000, bringing the total principal amount to $12.2-million as of Dec. 16, 2024. The note retains its original terms, including a 12-per-cent interest rate and a two-year maturity, with no other changes.

Not paying their bills, borrowing more money, and then this:

Prospera is generating sufficient field operating cash flows to cover G&A (general and administrative expenses), interest, AP (accounts payable) arrears and continuing rig activities to further boost production.

It becomes far easier to cover accounts payable when you refuse to pay your bills.

FWIW, you still owe me for four months, Lutke, and I will continue to write about your company in the meantime, monitoring every move you make, until the day your credit finally runs out.

But hey, “I sincerely hope we can maintain a positive working relationship and explore potential collaborations in the future.”

— Chris Parry

FULL DISCLOSURE: I’m a vengeful cunt and batting 1.000 in lawsuits. Part two comes in a month. Merry Xmas.