Sam Sinay, et al. v. CNOOC Limited, et al. 12-CV-01513-Amended...
Transcript of Sam Sinay, et al. v. CNOOC Limited, et al. 12-CV-01513-Amended...
Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 1 of 33
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
x SAM SINAY, Individually and on Behalf of All Others Similarly Situated,
Plaintiff,
VS.
CNOOC LIMITED, YANG HUA and ZHONG HUA,
Defendants.
x
Civil Action No. 1:1 2-cv-0 1513 -KBF
CLASS ACTION
AMENDED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS
DEMAND FOR JURY TRIAL
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Lead Plaintiff Roofers Local No. 149 Pension Funds ("Lead Plaintiff" or "Plaintiff') alleges
the following based upon the investigation of Plaintiff's counsel, which included, among other things
a review and analysis of: (a) filings made by CNOOC Limited ("CNOOC" or the "Company") with
the Securities and Exchange Commission ("SEC"); (b) press releases, press conferences, analyst
conference calls and other public statements issued by the Company; (c) news articles,
investigations, and other publications disseminated concerning Defendants (defined below) and
related parties; (d) securities analyst reports concerning CNOOC and its operations; and (e) analysis
of legal actions related to the issues and events in question, including pleadings filed in the action
captioned Peiqing Cong v. ConocoPhillips Co., Case No. 4:12-cv-01976, which is pending in the
United States District Court for the Southern District of Texas, Houston Division. Plaintiff believes
that further substantial evidentiary support exists for the allegations set forth herein which will be
revealed after a reasonable opportunity for discovery.
NATURE OF THE ACTION
1. This is a federal securities class action on behalf of all persons and entities who
purchased or otherwise acquired the American Depositary Shares ("ADSs") of CNOOC between
January 27, 2011 and September 16, 2011, inclusive (the "Class Period"), against CNOOC and
certain of its officers and/or directors for violations of the Securities Exchange Act of 1934 (the
"1934 Act")
2. CNOOC is the People's Republic of China's ("PRC") largest offshore state oil
company. It is a subsidiary of China National Offshore Oil Corporation Group, which is wholly
owned by the PRC, and is regulated by the State Oceanic Administration ("SOA"), an administrative
agency also wholly owned by the PRC. The Company, along with its subsidiaries, is a producer of
offshore crude oil and natural gas and is an independent oil and gas exploration and production
company.
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3. CNOOC is the majority owner of the Penglai 19-3 ("PL 19-3"), an oilfield in northern
Bohai Bay. PL 19-3 is under a production sharing contract ("PSC") pursuant to which CNOOC
owns 51% of PL 19-3 and ConocoPhillips ("COPC"), an energy company, owns the remaining 49%.
COPC is responsible for the day to day operations of PL 19-3.
4. On June 4, 2011 and June 17, 2011, a series of catastrophic oil spills occurred at
PL 19-3 in the Bohai Bay, which caused a sharp deterioration in the quality of the Bohai Bay
seawater, a public health hazard to the aquatic life and fisherman of PL 19-3 and had (and continues
to have) an adverse effect on CNOOC ' s financial performance. Despite the material nature of this
spill - which has been described as "the most serious marine ecological incident in China" -
Defendants failed to disclose to investors in a timely manner that these spills occurred. Moreover,
Defendants had led investors to believe that, in the event of an oil spill, CNOOC had sufficient
precautionary safety measures in place as well as adequate emergency procedures to properly
respond to spills. It did not.
5. After publication of the SOA's report on its investigation into the spill (the "SOA
Report"), investors learned: (i) that the safety precautions that were purportedly in place at PL 19-3
were inadequate; and (ii) that PL 19-3's emergency procedures were, at best, insufficient. It also
became apparent that whatever emergency procedures were in place had not been adhered to,
thereby making Defendants' statements about the successful progress of the clean-up effort
materially false and misleading.
6. As news of the spill and its fallout made its way into the marketplace, shares of
CNOOC ADSs were hammered by massive sales, sending them down 37% from their Class Period
high.
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JURISDICTION AND VENUE
7. Jurisdiction is conferred by §27 of the 1934 Act. The claims asserted herein arise
under §10(b) and 20(a) of the 1934 Act, 15 U.S.C. §78j(b) and 78t(a), and SEC Rule lOb-5, 17
C.F.R. §240.10b-5.
8. Venue is proper in this District pursuant to §27 of the 1934 Act. Many of the false
and misleading statements were made in or issued from this District. CNOOC's shares, for purposes
of its ADSs, are deposited with a financial institution based in New York, New York. CNOOC's
ADSs trade in an efficient market on the New York Stock Exchange ("NYSE").
9. In connection with the acts alleged in this complaint, defendants, directly or
indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to,
the mails, interstate telephone communications and the facilities of the national securities markets.
PARTIES
10. Lead Plaintiff purchased CNOOC ADSs during the Class Period, as set forth in its
certification that was previously filed in this action and incorporated herein by reference, and was
damaged as a result of Defendants' wrongdoing as alleged herein.
11. Defendant CNOOC is a producer of offshore crude oil and natural gas and an
independent oil and gas exploration and production company. It is a subsidiary of China National
Offshore Oil Corporation, which is wholly owned by the Chinese government.
12. Defendant Yang Hua ("Yang") was the Company's Chief Executive Officer ("CEO")
and Executive Vice Chairman of the Board. Yang was appointed President of CNOOC on August
31, 2011. Yang resigned as CEO in November 2011 and was re-designated as Non-Executive Vice
Chairman of the Company. As alleged herein, defendant Yang made materially false and misleading
statements during the Class Period, including those in CNOOC's SEC filings.
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13. Defendant Zhong Hua ("Zhong") is, and at all relevant times was, the Company's
Chief Financial Officer ("CFO"). As alleged herein, defendant Zhong made materially false and
misleading statements during the Class Period, including those in CNOOC's SEC filings.
14. The defendants named above in ¶J12-13 are referred to herein as the "Individual
Defendants." The Individual Defendants, along with Defendant CNOOC, are referred to herein as
"Defendants."
15. The Individual Defendants, because of their positions with the Company, possessed
the power and authority to control the contents of CNOOC's SEC reports, press releases and
presentations to securities analysts, money and portfolio managers and institutional investors, i.e.,
reports to the market. They were provided with copies of the Company's reports and press releases
alleged herein to be misleading prior to or shortly after their issuance, and had the ability and
opportunity to prevent their issuance or cause them to be corrected. Because of their positions
within the Company, and their access to material non-public information, the Individual Defendants
knew that the adverse facts specified herein had not been disclosed to and were being concealed
from the public and that the positive representations being made were materially false and
misleading. The Individual Defendants are liable for the false statements pleaded herein.
CLASS ACTION ALLEGATIONS
16. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules
of Civil Procedure on behalf of all persons who purchased CNOOC ADSs during the Class Period
and were damaged thereby (the "Class"). Excluded from the Class are Defendants and their
families, the officers and directors of the Company at all relevant times, members of their immediate
families and their legal representatives, heirs, successors or assigns and any entity in which
Defendants have or had a controlling interest.
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17. The members of the Class are so numerous that joinder of all members is
impracticable. The disposition of their claims in a class action will provide substantial benefits to
the parties and the Court. CNOOC has over 446 million shares of common stock outstanding,
owned by hundreds if not thousands of persons.
18. There is a well-defined community of interest in the questions of law and fact
involved in this case. Questions of law and fact common to the members of the Class which
predominate over questions which may affect individual Class members include:
(a) whether the 1934 Act was violated by Defendants;
(b) whether Defendants omitted and/or misrepresented material facts;
(c) whether Defendants' statements omitted material facts necessary to make the
statements made, in light of the circumstances under which they were made, not misleading;
(d) whether Defendants knew or deliberately disregarded that their statements
were false and misleading;
(e) whether the price of CNOOC ADSs was artificially inflated;
(f) whether Defendants caused Class members to suffer damages; and
(g) the extent of damages sustained by Class members and the appropriate
measure of such damages.
19. Plaintiff's claims are typical of those of the Class because Plaintiff and the Class
purchased CNOOC ADSs at artificially inflated prices and sustained damages as a result of
Defendants' wrongful conduct.
20. Plaintiff will adequately protect the interests of the Class and has retained counsel
who are experienced in class action securities litigation. Plaintiff has no interests which conflict
with those of the Class.
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21. A class action is superior to other available methods for the fair and efficient
adjudication of this controversy.
FRAUDULENT SCHEME AND COURSE OF BUSINESS
22. Defendants are liable for: (i) making false statements; or (ii) failing to disclose
adverse facts known to them about CNOOC. Defendants' fraudulent scheme and course of business
that operated as a fraud or deceit on purchasers of CNOOC ADSs was a success, as it: (i) deceived
the investing public regarding CNOOC's prospects and business; (ii) artificially inflated the price of
CNOOC ADSs; and (iii) caused Plaintiff and other members of the Class to purchase CNOOC
ADSs at artificially inflated prices.
SUBSTANTIVE ALLEGATIONS
The Company
23. CNOOC is the largest producer of offshore crude oil and natural gas and one of the
largest independent oil and gas exploration and production companies in the world. It operates in
three segments: independent operations, production sharing contracts or other joint arrangements,
and trading business. The Company has four producing areas in offshore China, which include the
Bohai Bay, Western South China Sea, Eastern South China Sea and East China Sea. It also has oil
and gas assets in Indonesia, Australia, Nigeria, Argentina, the United States and other countries.
The Bohai Bay and PL 19-3
24. The Bohai Bay is the primary crude oil producing area for the Company. At the end
of 2010, the reserves at the Bohai Bay were 1,11 9m boe (barrels of oil equivalent) and the
production volume was 429,008 hoe/day. These amounts represented 37.4% and 47.6% of the
Company's reserves and production, respectively.
25. The crude oil produced in the Bohai Bay region is mainly heavy oil and has an
average acid value of 5 and is 2% sulfur, making it one of the most acidic of all crude oils. It also
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possesses a high content of heavy metals and salts - specifically, heavy naphthenic acid, which
accounts for 48% of the oil's acid. Thus, the oil in the Bohai Bay has a particularly corrosive
quality.
26. Penglai is one of the major oilfields in the Bohai Bay. The discovery of Penglai is
widely considered one of the most significant oil discoveries in China. Other top producing oilfields
include Suizhong, Qinhuangdao, and Bonan. PL 19-3 is the largest oilfield in Penglai by net
reserves and production. Prior to the oil spill, PL 19-3 was producing 23,000 tons of crude oil per
day and contributing 62kb/d (kilo barrels per day) to the Company's net yield. This accountedfor
more than 10% of CNOOC's domestic oil production and 9% of CNOOC's total oil production.
27. While COPC serves as the operator of PL 19-3, both CNOOC and COPC had
representatives on a Joint Management Committee (the "JMC") who were responsible for reviewing
and approving important matters related to the development of PL 19-3. According to the
Company's annual report filed on Form 20-F with the SEC on April 29, 2011 for the year ended
December 31, 2010 ("2010 Form 20-F"), CNOOC "designate[s] the chairman of the committee and
the foreign partners as a group designate the vice chairman." The JMC "has the authority to make
decisions on matters including reviewing and approving operational and budgetary plans,
determining the commercial viability of each petroleum discovery, reviewing and adopting the
overall development plan; and approving significant procurements and expenditures as well as
insurance coverage."
Unless otherwise noted, emphasis has been added.
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PL 19-3 Is Operated In an Unsafe Manner and in Violation of Applicable Laws
28. The SOA Report has made clear that the spills at PL 19-3 occurred because PL 19-3
was not operated safely and was not in compliance with standard industry safety practice or Chapter
III, Articles 10-17 of The Marine Environmental Protection Law of the PRC.
29. Specifically, on June 2, 2011, when Well 23 experienced anomalies of significant
increase in water injection amount and a decrease in injection pressure, injection was not suspended
and there was no attempt to determine the causes of the anomalies in a timely manner. Instead, it
maintained pressure and continued the water injection, which resulted in high pressure in certain
water injection zones and the opening of an existing geological fault. Upward flows formed along
the fault which led to an undersea oil spill near Platform B.
30. In violation of the overall development plan, Well B-23 had been executing
commingled water injectionfor a long time without any zonal water injection. By neglecting the
differences of pressure from multiple sets of oil layers, only the pressure supply of under-pressured
layers was taken into consideration. The result was high-pressure risks due to water injection into
individual oil layers.
31. Further, the SOA Report found that the monitoring system on the wellhead pressure
of water injection wells was not fully developed, management was not appropriate, and no upper
limit on safe wellhead pressure for water injection wells had been set. And, stability pressure tests
on a number of faults were not conducted, no risk warning was given and calibration of the fault's
pressure limit for cracking was not given.
32. Likewise, the SOA Report found that cuttings reinjection of Well C25, which was
near Platform C, violated the provisions of the overall development plan. Specifically, without
reporting to higher authorities and relevant departments or giving risk warnings, the cuttings re-
injection layer was moved upward several times until it was close to the oil layer. This generated
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ultra-high pressure which led to well overflow when drilling started and resulted in an undersea oil
spill.
33. The SOA Report also found that the emergency response was improper once drilling
encountered the high-pressure layer. Once the high pressure layer was reached, it should have been
analyzed in a timely manner-to improve emergency response capacity, or measures should have been
taken such as running intermediate casing. Lack of effective emergency response led to a
continuous increase of pressure in the Well C25 well and side leakage, causing a seabed oil spill.
The Well C20 drilling design department's failure to design in accordance with the surface casing
depth reduced the capacity of emergency response.
34. Importantly, the SOA Report concluded that the oil spills occurred because,
contrary to CNOOC's Class Period statements, no necessary precautionary measures were taken
regarding foreseeable risks. And, the SOA also determined that "despite being COPC's business
partner, CNOOC also bore supervision responsibility over PL 19-3 oilfield production."
The PL 19-3 Oil Spill Followed by CNOOC's Failure to Disclose
35. The catastrophic oil spill at PL 19-3 occurred in June 2011 in two phases: The first
phase occurred on June 4, 2011 on Platform B and the second phase occurred on June 17, 2011 on
Platform C. Although it was CNOOC's regular business practice to publicly report any malfunction
- minor or major - immediately after it occurred, CNOOCfailed to timely disclose or comment on
the FL 19-3 oil spill —one of the most severe oil spills in China's history —for a month. CNOOC
had traditionally informed the public of various oil spills and other malfunctions occurring in their
oilfields in a timely manner: for example, on April 22, 2011, CNOOC issued a press release
announcing that that day, a malfunction occurred on a single point mooring system of the Floating,
Production, Storage and Offloading (FPSCO) vessel "Haiyangshiyou 102," serving in the Bohai
S
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Bay, due to rough sea conditions. A minor oil leak in Suizhong (SZ) 36-1 oilfield, located in the
Bohai Bay, was likewise disclosed within a day of its occurrence.
36. On July 5, 2011, the SOA, China's coastal regulator (which, like CNOOC's parent, is
owned by the PRC), issued a press release announcing the two spills that took place at PL 19-3.
Significantly, this was the first public announcement disclosing the spills.
37. Chinese officials later admitted that they deliberately refrained from disclosing the
PL 19-3 spill to investors. They rationalized their decision to mislead the public by saying that
CNOOC was in the process of assessing the damage and did not want to cause panic. 2 Specifically,
on July 8, 2011, in an interview with China Central Television, CCTV News Channel, Mr. Wang
Bin, the deputy chief of the Office of Oceanic Environmental Protection, stated:
When we release the information to the public, we need to make sure they are detailed, verified, objective and accurate, so that we would be comfortable to do so. Under the circumstances back then, we have considered the data received not sufficient to meet our criteria for such disclosure. To avoid unnecessary panic or qualms, we believed we determined in what scope and to what extent, that these information should be revealed to the public.
38. Predictably, the market was highly critical of the Chinese government and CNOOC's
decision to deceive investors:
On July 11, 2011, Han Xiaoping, the chief information officer of China Energy Network, commented that "in terms of hiding material information, despite that CNOOC was not the No. 1 - liable party, it nonetheless had duties to urge its operating company to reveal relevant information at its earliest possibility. "
2 On June 21, 2011, a microblogger posted an entry on an internet website in China which stated: "It's been two days since two oil wells on Bohai oil field were discovered with oil spills." Although no specific mention was made of PL 19-3, the microblog entry was deleted shortly after it was posted. An article in Global Times on July 6, 2012, noted that "[i]f there had not been a microblog tip-off on June 21 and media reports after that, we are not sure whether the SOA would hold a press briefing now or not."
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On July 14, 2011, the Los Angeles Times reported that environmental groups were outraged that CNOOC and governmental regulators hid the FL 19-3 oil spill. It noted that "[a]ctivists remain deeply skeptical about the severity of the spills given China's notoriously weak enforcement of environmental laws, which they say favor economic interests above all." The newspaper quoted Ma Jun, the head of the Institute of Public and Environmental Affairs, a non governmental organization in Beijing, who commented that "[w]e cannot help but wonder: Is the [SOA] a serious watchdog that exists to prevent bigger incidentsfrom happening, or a loving parent who is overprotective of his own child."
On July 6, 2011, the Global Times commented that "it is not acceptable that the SOA, which had learned about the incident in early June, hold the news until a month later."
Similarly, on July 15, 2011, AFP, a Global News agency reported: "The spill was kept secret by the authorities for several weeks before being made public this month, sparking suspicions of an official cover-up, and the disaster has triggered a furious public response in China."
39. Market analysts also took note of CNOOC's lack of transparency. Specifically,
Equities Research commented that the Company's management was not communicative: "[w]e
believe the communication and investor hand holding around these issues has been weak at best, and
for this we think Mr. Hua can be rightly held responsible."
Cleanup of the Spills
40. While the Company represented in its 2010 Form 20-F that it had emergency plans in
place to deal with any oil spills and that it had a cooperation agreement with Oil Spill Response
Limited (an oil spill response specialist) to deal with the environmental impact resulting from any
spills or leakage, it failed to disclose that it required COPC to utilize China Offshore Environmental
Services Ltd. ("COBS"), a CNOOC-affiliated company, to assist with the cleanup of the PL 19-3
spill. Significantly, COBS was only capable of handling "Tier II Level" oil spills - an oil spill that
releases between 10 and 100 tons of oil. By contrast, an emergency environmental response
company such as Australian Industry Cooperative Response Arrangements - which, at the time of
the PL 19-3 spill, COPC already had a contract with - has "Tier III Level" capacity, which means
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that it is capable of handling very serious oil spills that release over 100 tons of oil. The PL 19-3
spill undoubtedly required Tier III Level treatment as the spill released an estimated 50,000 tons of
oil into the Bohai Bay.
MATERIALLY FALSE AND MISLEADING STATEMENTS MADE DURING THE CLASS PERIOD
CNOOC Represents to Investors that Its Production Rates Are Increasing and that Its Health, Safety and Environmental Controls Are Adequate
41. The Class Period begins on January 27, 2011. On that day, CNOOC issued a press
release entitled "2011: CNOOC Limited Welcomes a Year of Steady Growth." In addition to
announcing the Company's targeted total net production for 2011 of 3 55-365 million BOE, the
release further stated:
"In the new year, we will maintain a robust capital expenditure plan and implement exploration and development activities as scheduled. Meanwhile, we will continue to execute stringent cost control and prudent financial policy to further improve the overall performance of the Company," Mr. Zhong Hua, CFO of the Company commented.
Mr. Yang Hua, the Vice Chairman and CEO of the Company said, "In the past five years, we have greatly enhanced our corporate value through sticking to our established strategies and delivering the production growth rate of 7-11% from 2006 to 2010. The Company will see a year of steady growth in 2011, laying a more solid base for our future development in the next five years."
42. Similarly, on March 23, 2011, CNOOC issued a press release announcing its financial
results for its fourth quarter and full year 2010. For the full year, the Company reported that its net
production reached 328.8 million BOE, which represented a 44.4% increase year over year - the
highest production growth in the Company's history. The release stated in part:
Mr. Yang Hua, CEO of the Company commented, "In 2010, CNOOC Limited recorded exciting results in production growth, reserve replacement and net profit, demonstrating the Company's outstanding operational and management capabilities. Although in the year, the pressure on cost inflation was still one of the steep challenges faced by the entire industry, we were able to maintain a competitive cost structure among the global peers by implementing stringent cost control measures."
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43. Defendants also emphasized to investors the Company's commitment to health, safety
and environmental protection ("HSE"). For example, on a conference call that took place on March
23, 2011, Defendant Yang highlighted this very point: "Our safety, environmental performance was
never off our priority list, and this year, we have delivered another satisfactory OSHA statistics." He
further confirmed that the Company "[l]ast but not least [] will continue to focus on HSE in 2011."
44. On April 4, 2011, CNOOC ADSs closed at US$270.64 per ADS, their Class Period
high.
45. The Company continued to report positive results. On April 27, 2011, CNOOC
issued a press release reporting a total net production of 85.2 million BOE for the first quarter of
2011. The release stated, in part:
Mr. Yang Hua, Chief Executive Officer of the Company commented, "We have recorded excellent first quarter results driven by our efficient operation and higher realized oil prices. Meanwhile, we have made great progress in overseas development, which will provide a strong support for our reserve and production growth in the future."
46. CNOOC also continued to make assurances regarding the Company's focus on HSE.
In CNOOC's April 8, 2011 Form 6-K, the Company again touted its environmental responsibility
and identified specific operational controls in place to prevent oil spills, stating, in part:
As an offshore E&P Company, we face a huge operational risk and therefore always emphasize HSE. The Company promotes the philosophy and culture of HSE among its employees. Until now, the Company established a comprehensive management system to improve the employees' awareness of HSE during operations, and strengthen their ability of risk identification and risk management skills.
In 2010, the HSE in oil industry faced critical challenges. The oil spill incidents at Gulf of Mexico and other regions have caused serious environmental pollution and thus caught high public attention. On the other hand, the pressure on production safety, environmental protection and occupational health conditions has been intensified due to the Company's intensive workloads on development. As a result, the Company continues to enhance the risk identification and control on HSE and try to identify and prevent the key potential risks in advance.
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In 2010, the Company conducted inspections on trial production and safety appraisal for various oil and gas fields and production facilities, and completed the evaluation on the HSE system for branches such as Shenzen to further improve the Company's operational system and management effectiveness.
After the oil spill incident at Gulf of Mexico, the Company organized safety inspections on all oil and gas fields as well as the production facilities to prevent the risks embedded in the operation of drilling, development and production. The proper measures have been performed to cope with potential risk identified. In addition, the Company has further improved the stipulations on the operational safety and environmental protection on well drilling and completion.
47. The statements referenced above in ¶J4 1-43 and 45-46 were materially false and
misleading because Defendants knew or were reckless in not knowing:
(a) that PL 19-3, the Company-owned oilfield, was being operated in an unsafe
and negligent manner and was not in compliance with the requisite environmental, safety and health
laws and regulations;
(b) that the systemic problems at PL 19-3 posed a high level of risk to the workers
at PL 19-3, the Bohai Bay marine environment and the Company's financial health; and
(c) based on the foregoing, Defendants lacked a reasonable basis for their positive
statements about the Company's "outstanding" management capabilities; operations; its compliance
with environmental, safety and health laws and regulations; and the Company's expected financial
performance.
48. On April 29, 2011, CNOOC filed the 2010 Form 20-F. In the section of the 2010
Form 20-F labeled "Health, Safety and Environmental Policy, or HSE," the Company represented
that:
After the oil spill incident at Gulf of Mexico, the Company organized safety inspections on all oil and gas fields as well as the production facilities to prevent the risks embedded in the operation of drilling, development and production. The proper measures have been performed to cope with the potential risks identified. In addition, the Company has further improved the stipulations on the operational safety and environmental protection on well drilling and completion.
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49. In the section labeled "Operating Hazards and Uninsured Risks," the Company
represented that:
For all of our offshore operations, we have conducted comprehensive environmental impact evaluations and adopted emergency plans to deal with potential oil spills. Pursuant to the requirements of the PRC government, the evaluations and plans for our offshore operations in the PRC have been reviewed and approved by the industry experts and have been filed with the PRC government. The evaluations and plans for our offshore operations overseas have complied with the legal and regulatory requirements of the relevant local jurisdictions.
In addition, we currently have seven oil spill emergency handling bases, to which we have contributed land and funds for construction, separately located in seven cities in the PRC, namely Suizhong, Tanggu, Longkou, Huizhou, Shenzhen, Zhuhai and Weizhou. All the oil spill emergency handling bases are close to our workplaces of operations, and in the event of any oil spill, explosion or other similar events, they would react promptly and assist us in coping with such accidents effectively. We also cooperate with Oil Spill Response Limited, an industry-funded company specializing in oil spill response with operating bases in the United Kingdom, Singapore and Bahrain, to deal with the environmental impact that would occur in the event of oil spills or leakage resulting from our offshore operations. We have entered into contracts with Oil Spill Response Limited for certain of our exploration projects, including our project in Equatorial Guinea.
50. In the section labeled "Environmental Regulation," the Company represented that:
"We believe that our environmental protection systems and facilities comply with applicable
national and local environmental protection regulations."
51. The statements referenced above in ¶J48-50 were materially false and misleading
because Defendants knew or were reckless in not knowing:
(a) that PL 19-3, the Company-owned oilfield, was being operated in an unsafe
and negligent manner and was not in compliance with the requisite environmental, safety and health
laws and regulations;
(b) that the systemic problems at PL 19-3 posed a high level of risk to the workers
at PL 19-3, the Bohai Bay marine environment and the Company's financial health;
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(c) that the measures taken to cope with the risks at PL 19-3, including the
environmental impact evaluations and adopted emergency plans, were grossly inadequate;
(d) that the Company's oil spill emergency handling bases and/or response teams
were not equipped to respond to a large-scale oil spill; and
(e) that the Company did not have a proper emergency response team in place to
deal with an oil spill at PL 19-3, even though PL 19-3 accounted for more than 10% of CNOOC's
domestic oil production and 9% of CNOOC's total oil production.
CNOOC Downplays the Severity of the Spill
52. In an effort to preserve its reputation and stem the decline in its share price, CNOOC
continually downplayed the severity of the PL 19-3 oil spill. It ultimately became clear to the public,
however, that this spill was in fact catastrophic and would undoubtedly have a lasting effect on both
the Bohai Bay's marine environment and CNOOC's financial performance.
53. Following the SOA press release reporting on the PL 19-3 spills, on July 6, 2011,
CNOOC issued its first public statement concerning the spills in a press release entitled "PL 19-3 Oil
Spills Basically Under Control." The release stated in part:
CNOOC Limited (the "Company '9 announced today that the oil spills occurred in PengLai ("FL") 19-3 oilfield have already been basically under control. The State Oceanic Administration of People's Republic of China ("SOA") made relevant announcement on July 5.
PL 19-3 field, located in Bohai Bay, is an oil field under Production Sharing Contract with ConocoPhillips China Inc ("COPC"). COPC is the Operator and responsible for the daily operations.
According to the report of COPC, a seepage of oilfrom the seabed was found near the Platform B in early June. It is the first of its kind occurred [sic] in China and the cause is still subject to further study and analysis. It was also observed in mid June that one well being drilled in Platform C occurred [sic] a small-scale influx, resulting in another oil spill.
After the incidents occurred, COPC immediately activated response procedures, closed part of the water injection wells, and suspended drilling operations of the
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field. COPC also deployed necessary equipment and personnel for oil recovery and area clean-up. As the partner, the Company has actively assisted COPC with its activities to minimize the impact.
According to the statement of SOA, the above incidents have certain impact on the marine environment surrounding PL 19-3 oilfield, resulting in about 840 square kilometers of seawater worse than Grade IV.
Through those measures taken by the Operator such as reducing pressure in Platform B and implementing a cementing procedure in Platform C, the above incidents were well controlled on June 19 and 21 respectively. As of July 4, there is no obvious oil slick on the sea surface. Only [a] very small amount of oil sheen can be observed occasionally near Platform B and C.
The relevant regulatory agencies have notified COPC to promptly clean up and support investigation of the responsibilities for the oil spill. SOA will continue to urge COPC to closely monitor the status of the leaking point, and will also supervise COPC taking effective measures to minimize the impact on marine environment. As the non-operator, the Company will continue [to] urge and assist COPC to fulfill SOA 's requirements.
54. The statements referenced above in ¶53 were materially false and misleading because
Defendants knew or were reckless in not knowing:
(a) that the PL 19-3 spill was not "under control";
(b) that the Company's insistence on using its affiliated company to handle the
cleanup was delaying the cleanup effort and causing further damage;
(c) that the Company's oil spill emergency handling bases and/or response teams
were not equipped to respond to a large-scale oil spill; and
(d) that the Company did not have a proper emergency response team in place to
deal with the PL 19-3 oil spill.
55. Just one week later, on July 13, 2011, CNOOC issued a press release entitled
"Platform B and C of Penglai 19-3 Oilfield Suspend Production," which stated, in part:
CNOOC Limited (the "Company") announced today that ConocoPhillips China Inc ("COPC"), the Operator of Penglai 19-3 field informed the Company that the State Oceanic Administration of People's Republic of China ("SOA") has required COPC
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to suspend the production of Platform B and C of the field until the risk of oil spill is eliminated.
According to the latest report from COPC, a thin sheen has been observed recently near Platform B and amounts of bubbles have been occasionally generated from the oil-based mud that remains on the sea floor near Platform C. Clean up work by COPC continues, including diving operations to remove any residual oil-based mud on the sea floor at Platform C. Meanwhile, COPC continues to closely monitor the original seep location of Platform B.
As the non-operator, the Company will continue to urge and assist COPC to complete the clean-up work as quickly as possible, andto reduce the impact of the oil spill incidents on [the] marine environment according to SOA 's requirement.
56. On July 15, 2011, CNOOC issued a press release entitled "COPC Announced the
Amount of Fluid Spilled from Penglai 19-3 Oilfield," in which the Company revealed that
1,500 barrels of oil had been released into the water. The press release stated in part:
CNOOC Limited (the "Company") announced, according to the latest statement by ConocoPhillips China Inc ("COPC"), the Operator of Penglai 19-3 field, the current estimate of the aggregate amount of fluid spilled from the two incidents is approximately 1,500 barrels (240 cubic meters) of oil and oil-based drilling fluids.
According to COPC, it is working with independent experts to validate the total spill quantity.
As the non-operator, the Company will continue to urge and assist COPC to complete the clean-up work as quickly as possible, and to reduce the impact of the oil spill incidents on [the] marine environment according to the requirement of the State Oceanic Administration of People's Republic of China.
57. Less than a month later, on August 12, 2011, CNOOC announced that 3,217 barrels
of oil had been released into the water - more than double the amount that the Company had
previously stated. In its press release entitled "COPC Updates on Bohai Bay Clean Up," the
Company stated in part:
CNOOC Limited (the "Company") announced that, according to the latest statement by ConocoPhillips China Inc (COPC), the Operator of Penglai 19-3 oil field, more oil-based drilling mud (OBM) on the sea floor was identified. This addition brings the revised volume of OBM on the seabed to 400 cubic meters (2,500 barrels). The volume of oil released to the sea surface remains at 114 cubic meters (717 barrels). The total volume offluids spilled from the incident amounts to 514 cubic meters
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(3,217 barrels) of oil and OBM and exceeds 240 cubic meters (1,500 barrels) as originally estimated by the Operator.
After the incident occurred, COPC has deployed substantial resources for oil recovery and cleanup work. According to COPC, its response personnel has recovered 269 cubic meters (1,700 barrels) of OBM from the seabed near the Penglai 19-3 C platform, and approximately 70 cubic meters (440 barrels) of oil/water mix from the sea surface to date.
As the non-operator, the Company has also fully utilized its resources and personnel to assist COPC on shoreline protection activities with 111 people walking approximately 3,289 kilometers of shoreline and 19 vehicles patrolled approximately 48,645 kilometers of shoreline along the Bohai Bay area by 11 August.
In order to meet the requirements set by the State Oceanic Administration, the Company will continue to urge and assist COPC to stop the leaks and complete the cleanup work by the end of August, so as to minimize the impact of the oil spill incident on the marine environment.
58. On August 18, 2011, in response to the spills, a Joint Investigation Team (the "JIT")
was formed to investigate. The iTT was headed by the SOA and included representatives from the
ministry of land and resources, the ministry of environmental protection, the ministry of transport,
the ministry of agriculture, the administration of work safety and the national energy administration.
In examining events surrounding the PL 19-3 spill, the JIT determined that "despite being COPC's
business partner, CNOOC also bore supervision responsibility over PL 19-3 oilfield production."
The JIT further concluded that there should have been necessary precautionary measures in place for
foreseeable risks.
59. On a conference call on August 24, 2011, an unidentified Company representative
downplayed the effect of the PL 19-3 spill:
Overall, the key message is, according to ConocoPhihip 's disclosed information, 95% of the spill situation has been contained and controlled. So what we can be confident to say is that we are comfortable to say that it is largely contained and controlled. So, what remained is the cleanup of the seabed and some of the oil sheen on the sea surface.
SME
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60. The statements referenced above in ¶J5 5-57 and 59 were materially false and
misleading because Defendants knew or were reckless in not knowing:
(a) that the risks associated with the PL 19-3 spill were highly significant and the
spill was far from sufficiently "contained" or "controlled;"
(b) that the Company's insistence on using its affiliated company to handle the
cleanup was delaying the cleanup effort and causing further damage;
(c) that the Company's oil spill emergency handling bases and/or response teams
were not equipped to respond to a large-scale oil spill; and
(d) that the Company did not have a proper emergency response team in place to
deal with the PL 19-3 oil spill.
61. On August 26, 2011, the SOA described the spill as "the most serious marine
ecological incident in China." On August 29, 2011, Dow Jones News Wire reported that "Beijing
describes the Bohai Bay mishap as its worst offshore oilfield accident, saying it spread 840 square
kilometers (324 square miles), killed marine life, swept ashore and continues to sprout new releases.
Chinese officials also have questioned the company's extraction methods. State media says oil from
the spill has reached the beach in Hebei and Liaoning provinces." Further, the POSCO Research
Academy of Environmental Science ("PRAES") estimated that at least 50,000 tons of oil had been
spilled in the sea as a result of the PL 19-3 oil spill.
62. As of August 31, 2011, and unbeknownst to investors, the SOA's goals for the
cleanup - the "two completes" (to examine the source of the spill and seal it), "three stops" (to stop
injection, stop drilling and stop production), "three continuances" (to continue to examine the areas
with spill risks, continue to seal spill sources and continue to clean up the spilled oil) and the "two
WE
Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 22 of 33
adjustments" (to adjust the "Overall Development Plan" and adjust the marine environmental impact
report) had not been met.
63. On September 2, 2011, the SOA announced that, contrary to its own and CNOOC's
public statements, the PL 19-3 spill was still not contained. Further, because the SOA's deadlines
for these goals had not been met, the SOA ordered CNOOC and COPC to immediately suspend all
oil production at the PL 19-3 oilfield. The authorities did not provide an indication as to when
production would resume at PL 19-3. To date, production at PL 19-3 has still not restarted.
64. On September 4, 2011, CNOOC announced SOA's decision to suspend PL 19-3. The
press release stated:
CNOOC Limited (the "Company") noticed that on September 2, 2011 State Oceanic Administration of People's Republic of China "SOA" announced, through SOA's official website, that ConocoPhillips China Inc ("COPC") as the Operator of Penglai (PL) 19-3 oil field, has neither completely screened out the oil spill risk nor completely sealed the sources of oil spillage. The SOA also announced that, according to the analysis of the Joint Investigation Team ("JIT"), the JIT had determined that the oil spill incident at PL 19-3 oil field is clarified as an accident involving liabilities as COPC did not fulfill is duties as a reasonable and prudent operator.
SOA has ordered COPC to suspend water injection, drilling and oil and gas production operations (the "Three Suspensions") at the entire PL 19- oil field, and to take effective measures to continue screening out the potential oil spill risks, seal all sources of oil spillage and complete the cleanup work in a timely manner. In addition, as announced by the SOA, it has ordered COPC to recompose the Oceanic Environmental Impact Assessment (the "EIA") for the development of PL 19-3 oil field and upon further approval on the ETA to resume the operations gradually, and further ordered that COPC must revise the Overall Development Plan (the "ODP") and the "Three Suspensions" will only be lifted after the approval of the ODP.
In addition, the SOA also announced it will, on behalf of State, make claims against COPC for the damage to the marine environment caused by the PL 19-3 oil spill accident in accordance with Marine Environment Protection Law of the People's Republic of China. Currently, the relevant preparation work is underway.
We fully respect the decisions made by SOA. As the non-operator, the Company will continue to assist COPC to execute SOA's decisions and to inform the public of the work progress as well as to welcome the supervision from the public.
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65. The press release also discussed the impact that the PL 19-3 oil spill would have on
the Company's production:
The operations of Platforms B and C ofPLl9-3 oil field were already suspended on July 13 as required by the SOA. As a result, the Company's net production has been reduced by approximately 22,000 barrels per day. The suspension of operations of the entire PL19-3 oilfield will further reduce the Company's net production by approximately 40,000 barrels per day.
66. While shares of CNOOC stock did not trade in the U.S. that day because of Labor
Day, shares of CNOOC on the Hong Kong Exchange reacted sharply to this news and declined 11%,
the biggest single day decline in three years. On September 6, 2011, the next available day of
trading in the U.S., shares of CNOOC ADSs opened at $175.77 per ADS, a decline of $15.81 per
ADS from their prior close, or 8% lower.
67. In a September 5, 2011 article, Reuters explained that the marked decline in
CNOOC's share price was a result of the unexpected announcement of the PL 19-3 suspension:
"Investors thought the leak had been sealed so did not expect the government to order a full
suspension of output, analysts said." According to Lee Wee Keat, an analyst from DBS Group
Research, when it was ultimately disclosed that PL 19-3 operations would be completely shut down,
"it was a negative surprise to the market."
68. On September 6, 2011, it was announced that CNOOC and COPC would establish a
fund to benefit those harmed by the environmental impact of the oil spill.
69. On this news, CNOOC's ADSs declined US$9.39 per ADS, a one-day decline of
nearly 5%, on high trading volume. Thereafter, as news of the true extent of the severity of the oil
spill emerged, CNOOC's ADSs continued to decline.
70. On September 18, 2011, it was announced that CNOOC and COPC would establish a
second fund to further address the environmental impact of the PL 19-3 oil spill.
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71. On this news, CNOOC' s ADSs declined US$6.85 per ADS on September 19, 2011, a
one-day decline of nearly 4% on high trading volume.
CNOOC Represents that the Company Is Assisting COPC in the PL 19-3 Cleanup Efforts
72. Throughout the Class Period, the Company made materially false and misleading
statements regarding its efforts to assist COPC in controlling the PL 19-3 oil spill. On August 24,
2011, CNOOC issued a press release announcing its second quarter results. In addition to reporting
a total net production of 168.7 million BOE for the first half of 2011, CNOOC stated that it was
actively assisting COPC in the PL 19-3 cleanup. The release stated, in part:
The Company has kept a good track record on health, safety and environmental protection (HSE) since [it was] established more than a decade ago. However, the oil spill incident of Penglai 19-3, an oilfield operated under production sharing contract in Bohai Bay, posed HSE challenges to the Company. This incident has made certain impact on the marine environment. Being a responsible energy company, we will continue to urge and assist ConocoPhillips China Inc., the operator of the Penglai 19-3 oilfield, to complete the cleanup work in a timely manner and to minimize the impact on the marine environment.
In addition, due to the combination of the progress of acquisition project and the impact from the oil spill incident, we reset the Company's annual production target at 331-341 million BOB.
Mr. Wang Yilin, Chairman of the Company said, "The outstanding results for the first half of 2011 demonstrated our operating and management capabilities. At the same time, we faced a challenge posed by the oil spill incident [that] occurred at Penglai 19-3 oilfield and we felt deeply sorry about it. The Company has already started performing inspection on the major facilities, equipments and production operations of all our oilfields, and reinforcing our risk management measures, to avoid similar incidents happening in the future."
Mr. Yang Hua, Chief Executive Officer of the Company commented, "Since the beginning of the year, the Company has increased its investments in unconventional energy through the acquisition of shale oil and gas and oil sands projects, building an important resource base for the future. Year 2011 is a year of steady growth for the Company. In the second half of the year, the Company will continue to progress steadily to lay a solid foundation for the Company's long term development."
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Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 25 of 33
In the first half of the year, the Company's basic earnings per share reached RMBO.88. In order to share our outstanding results with shareholders, the board has declared an interim dividend of HK$ 0.25 per share (tax inclusive).
73. Similarly, in its August 24, 2011 Form 6-K, CNOOC issued a press release in which
defendant Yang commented on the spill, stating, in pertinent part:
The Company always considers environmental protection, production safety and occupational health as important elements for the fulfillment of its social responsibilities, which are integrated with the Company's sustainable development strategy.
The senior management members and entire staff have attached great importance to health, safety and environmental protection ("HSE"), and good record has been kept since the establishment of the Company more than a decade ago. However, offshore oil exploration and production is characterized as a high risk industry, and the challenges HSE always exist. The oil spill incident of Penglai 19-3, an oilfield in the Bohai Bay area and operated under a production sharing contract, posed HSE challenges to the Company. The Company initiated the emergency response system in a timely manner and actively supported Conocophillips China Inc., the operator of the Penglai 19-3 oilfleld, to stop spillage and carry out spilled oil collection and cleanup work.
This was quite severe HSE accident in the Company's history and has made certain impact to the marine environment. We are regret deeply on this. Being a responsible company, we will continue to urge and assist ConcoPhillips China Inc. to stop the spillage and complete the cleanup work in a timely manner and to minimize the impact to the marine environment.
74. The statements referenced above in ¶J72-73 were materially false and misleading
because Defendants knew but failed to disclose that the Company's insistence on using its affiliated
company to handle the cleanup was delaying the cleanup effort and causing further damage.
75. On August 25, 2011, The Guardian reported in an article entitled "ConocoPhillips
warned that Chinese partner could hinder oil spill clean-up" that COPC's executives had complained
four years prior to the PL 19-3 oil spill that CNOOC could hamper COPC's ability to effectively
deal with an oil spill in China. In a diplomatic cable dated April 24, 2007, sent from COPC to
Daniel Sullivan, the United States Assistant Secretary of State for Economic, Energy and Business
Affairs, COPC executives suggested that CNOOC prioritized its business interests at the expense of
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Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 26 of 33
using the best-available methods in responding to an environmental crisis. According to the cable,
COPC had contracted with a U.S.-based emergency environmental clean-up service that could
deploy clean-up teams anywhere in the world within 24 hours. Unfortunately, COPC was prohibited
from using this service in China as CNOOC mandated COPC use a CNOOC-affiliated company
instead. COPC warned that CNOOC's restrictions limited COPC's ability to deal with an
environmental disaster in China.
76. COPC's concerns were realized when CNOOC required COPC to use its affiliated
company, COBS, to handle the clean-up of PL 19-3. Significantly, COES is an emergency
environmental response company that is only capable of handling "Tier II Level" oil spills - an oil
spill that releases between 10 and 100 tons of oil. By contrast, an emergency environmental
response company such as Australian Industry Cooperative Response Arrangements which, at the
time of the PL 19-3 spill, COPC already had a contract with - has "Tier III Level" capacity, which
means that it is capable of handling very serious oil spills that release over 100 tons of oil. The PL
19-3 spill undoubtedly required Tier III Level treatment as the spill released an estimated 50,000
tons of oil into the Bohai Bay. Thus, as COPC had predicted, CNOOC prioritized its own business
interests over the health and safety goals that it claimed to be committed to and required COPC to
use CNOOC's affiliate, COBS. As a result of CNOOC's actions, the clean-up response to the PL
19-3 oil spill was grossly inadequate.
POST CLASS PERIOD EVENTS
77. The effects of the PL 19-3 spill were long lasting. On November 10, 2011, the North
Sea Branch of SOA's monitoring report noted that oil continued to leak from Platform C. On
November 11, 2011, the SOA announced that an area of 6,200 square kilometers of water was
polluted with oil, and classified the PL 19-3 spill issue as a serious oil spill accident in the sea.
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78. On November 11, 2011, CNOOC finally revealed to the public that there had been
defects in the procedures and management of PL 19-3 that resulted in the severe oceanic pollution.
Specifically, the Company stated that, according to the conclusions made by the JIT: (i) COPC
violated the overall development plan during the production process on the PL 19-3 oilfield;
(ii) there were defects in its procedures and management; and (iii) necessary measures were not
taken after obvious accident signs emerged. These lapses in procedure resulted in liabilities and
severe oceanic pollution.
79. In June 2012, the JIT issued the SOA Report outlining the negligent maintenance of
PL 19-3 and the disastrous effects of the PL 19-3 oil spill that CNOOC had previously downplayed.
Specifically, the JIT found that: (i) PL 19-3 was negligently operated; (ii) the PL 19-3 spill had a
lasting effect on the Bohai Bay environment; (iii) after the spill in June of 2011, approximately 6,200
square kilometers surrounding the PL 19-3 oilfield and the area northwest of the oilfield was
polluted and an area of 870 square kilometers of seawater was seriously contaminated; (iv) the oil
spill contaminated the subsea sediment in the water surrounding PL 19-3 oilfield and northwest of
PL 19-3 oilfield; (v) from late June 2011 to the end of July 2011, the polluted area of sediments
reached 1,600 square kilometers, 20 kilometers of which was seriously polluted; (vi) by the end of
August, there were still 1,200 square kilometers of contaminated sediment, of which an area of 11
square kilometers was seriously contaminated; (vii) the oil spill caused a reduction of the species and
diversity of the marine plankton living in the Bohai Bay; (viii) there was significant damage to the
development, survival and growth of larval plankton (density of planktonic larvae decreased by 69%
within one month after the spill); and (ix) the total value of the marine ecological damage -
including marine environmental capacity losses, marine ecological service function losses, expenses
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Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 28 of 33
on marine habitat restoration and marine biology species recovery brought on by the oil spill - was
RMB 1.683 billion.
80. Thus, despite CNOOC's efforts to stem the decline of its share price by hiding the
truth about the catastrophic spill at PL 19-3, as set forth above, the alarming scope of the spill was
ultimately revealed to the market.
LOSS CAUSATION
81. During the Class Period, as detailed herein, Defendants repeatedly made materially
false and misleading statements and engaged in a scheme to deceive the market and a course of
conduct that artificially inflated the price of CNOOC ADSs. It operated as a fraud or deceit on Class
Period purchasers of CNOOC ADSs by misrepresenting the Company's internal health and safety
controls, the severity of the PL 19-3 spill and the Company's assistance in the clean-up efforts.
Later, when the Defendants' prior misrepresentations and fraudulent conduct became apparent to the
market through a series of disclosures, the price of CNOOC ADSs fell precipitously, as the prior
artificial inflation came out of the price over time and shares declined 37% from their Class Period
high. As a result of their purchases of CNOOC ADSs during the Class Period, Plaintiff suffered
economic loss, i.e., damages, under the federal securities laws.
82. Indeed, on January 11, 2012, an analyst at Macquarie Research specifically noted that
CNOOC's lack of transparency regarding the PL 19-3 spill caused the subsequent stock drop: "We
have not seen any serious discussion on HS&E post the Peng Lai oil spill. We believe this
represents a risk that needs to be addressed. Conoco was the operator but CNOOC has 51% of the
project and the spill has caused material share price underperformance." Similarly, on November
24, 2011, an analyst at Equities Research stated that the Company's lack of communication caused
the stock drop: "[w]e believe the communication and investor hand holding around these issues has
been weak at best, and for this we think Mr. Hua can be rightly held responsible."
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83. Reuters explained on September 5, 2011, that the marked decline in CNOOC' s share
price was a result of the announcement of the suspension: "Investors thought the leak had been
sealed so did not expect the government to order a full suspension of output, analysts said."
According to Lee Wee Keat, an analyst from DBS Group Research, when it was ultimately disclosed
that that PL 19-3 operations would be completely shut down, "it was a negative surprise to the
market."
84. On September 26, 2011, Deutsche Bank analysts stated that CNOOC's failure to
inform the public regarding the severity of the PL 19-3 spill caused its stock decline: "Worst-case
scenario, CNOOC management knew of the pending order to close Penglai." Further, analysts
observed that "poor management, at some level, is at the heart of CNOOC's most recent woes -
specifically exemplified in: 1) the timing of the SOA announcement; 2) operations at PL 19-3; and
3) communication with investors."
85. Similarly, the Macquarie Research report commented that CNOOC's poor stock
performance was due, in part to "less than perfect communication around these issues in an
unforgiving stock market environment."
NO SAFE HARBOR
86. CNOOC's verbal "Safe Harbor" warnings accompanying its oral forward-looking
statements ("FLS") issued during the Class Period were ineffective to shield those statements from
liability.
87. Defendants are also liable for any false or misleading FLS pleaded because, at the
time each FLS was made, the speaker knew the FLS was false or misleading and the FLS was
authorized and/or approved by an executive officer of CNOOC who knew that the FLS was false.
None of the historic or present tense statements made by Defendants were assumptions underlying or
relating to any plan, projection or statement of future economic performance, as they were not stated
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Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 30 of 33
to be such assumptions underlying or relating to any projection or statement of future economic
performance when made, nor were any of the projections or forecasts made by Defendants expressly
related to or stated to be dependent on those historic or present tense statements when made.
COUNT I
For Violation of §10(b) of the 1934 Act and Rule 10b-5 Against All Defendants
88. Plaintiff incorporates ¶J1 -87 by reference.
89. During the Class Period, Defendants disseminated or approved the false statements
specified above, which they knew or deliberately disregarded were misleading in that they contained
misrepresentations and failed to disclose material facts necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
90. Defendants violated § 10(b) of the 1934 Act and Rule lOb-5 in that they:
(a) employed devices, schemes and artifices to defraud;
(b) made untrue statements of material facts or omitted to state material facts
necessary in order to make the statements made, in light of the circumstances under which they were
made, not misleading; or
(c) engaged in acts, practices and a course of business that operated as a fraud or
deceit upon Plaintiff and others similarly situated in connection with their purchases of CNOOC
ADSs during the Class Period.
91. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of
the market, they paid artificially inflated prices for CNOOC ADSs. Plaintiff and the Class would not
have purchased CNOOC ADSs at the prices they paid, or at all, if they had been aware that the
market price had been artificially and falsely inflated by Defendants' misleading statements.
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COUNT II
For Violation of §20(a) of the 1934 Act Against All Defendants
92. Plaintiff incorporates ¶J1 -91 by reference.
93. The Individual Defendants acted as controlling persons of CNOOC within the
meaning of §20(a) of the 1934 Act. By virtue of their positions with the Company, and ownership of
CNOOC stock, the Individual Defendants had the power and authority to cause CNOOC to engage
in the wrongful conduct complained of herein. CNOOC controlled the Individual Defendants and all
of its employees. By reason of such conduct, Defendants are liable pursuant to §20(a) of the
1934 Act.
PRAYER FOR RELIEF
WHEREFORE, plaintiff prays for judgment as follows:
A. Declaring this action to be a proper class action pursuant to Fed. R. Civ. P. 23,
certifying Plaintiff as class representative and its counsel as Class Counsel;
B. Awarding Plaintiff and the members of the Class damages, including interest;
C. Awarding Plaintiff's reasonable costs and attorneys' fees; and
D. Awarding such equitable/injunctive or other relief as the Court may deem just and
proper.
JURY DEMAND
Plaintiff demands a trial by jury.
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Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 32 of 33
DATED: November 29, 2012 ROBBINS GELLER RUDMAN & DOWD LLP
SAMUEL H. RUDMAN DAVID A. ROSENFELD AVITAL MALINA
DAVID A. ROSENFELD
58 South Service Road, Suite 200 Melville, NY 11747 Telephone: 631/367-7100 631/367-1173 (fax) srudmanrgrdlaw.com drosenfeldrgrdlaw.com amalinargrd1aw.com
Lead Counsel for Plaintiff
SULLIVAN, WARD, ASHER & PATTON, P.C. MICHAEL J. ASHER 1000 Maccabees Center 25800 Northwestern Highway Southfield, MI 48075-1000 Telephone: 248/746-0700 248/746-2760 (fax)
Additional Counsel for Plaintiff
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Case 1:12-cv-01513-KBF Document 19 Filed 11/29/12 Page 33 of 33
CERTIFICATE OF SERVICE
I, David A. Rosenfeld, hereby certify that, on November 29, 2012, I caused a true
and correct copy of the attached:
Amended Complaint for Violation of the Federal Securities Laws
to be: (i) filed by hand with the Clerk of the Court; and (ii) served by first-class mail and
electronic mail counsel on:
Joel M. Mitnick A. Robert Pietrzak Daniel A. McLaughlin Tom Paskowitz Sidley Austin LLP 787 Seventh Avenue New York, NY 10019
David A. Rosenfeld