Terralliance Investors: What Us Audit?
Last Friday, we reported that oil and gas exploration company Terralliance is on the brink of implosion, despite $295 million in VC funding and an undisclosed amount of debt funding (which the equity backers were furiously trying to renegotiate). This morning, VentureWire’s Russ Garland moved the story forward, with the following three pieces of information: The debt funding amount was $150 million, from hedge fund Passport Capital. Terralliance has been in violation of the loan for months. Terralliance claimed that its mapping technology was 93% accurate, but that figure turned out to be massively inflated. As an aside, my understanding is that the numbers were initially correct (a few lucky strikes), but quickly debunked by Terralliance scientists. Terralliance began conducting its first-ever audit in December 2007, at the behest of a new potential investor. That final point about the audit is also what I’ve been hearing, and is why I originally suggested that the investors were “asleep at the wheel.” How do you not audit a company that has received around $450 million in capital, has scooped up oil and gas leases on several different continents and has purchased multiple Russian aircrafts
