DUG Technology taking Shell to US District Court over A$4.75M dispute

DUG Technology (ASX:DUG) shares sunk -5.5% late morning Tuesday as the company revealed it’s taking a subsidiary of global oil giant Shell to the US District Court.

The dispute, valued at US$3.1M (A$4.75M), is a long-running matter that originated in the early 2020’s and, in DUG’s version of events, has come back as a zombie dispute. Even after renewing contracts with the same entity whom the matter regards.

That entity, Texas-based MP2 Energy, is owned by Shell and operates as a power retailer. The lawsuit involves, ultimately, a disagreement over who holds a bag.

A damaging storm in Texas in 2021 led DUG, then involved in MP2’s energy retailing business via an energy management services agreement that would have given DUG a cut of power sales, to declare a force majeure on the whole project as infrastructure was damaged.

But, according to DUG, MP2 Energy continued to bill the company even despite the fact it declared a force majeure (to remind, a legal protection against unexpected natural disasters or extreme events.)

To be fair, the company has been insisting this is the case for years. In the company’s FY21 Annual Report, DUG wrote: “The other party to the agreeement continued to bill DUG … the Group has engaged legal counsel but no resolution has been reached at reporting date.”

Four years later (from the start of the dispute,) a resolution remains elusive. Shareholder frustration is likely behind DUG shares being sold off on Tuesday, and perhaps the fact this all boils down to less than A$5M also factors in.

If DUG had declared force majeure and satisfied every box it had to tick, it does appear, per DUG’s explanation, the company has a strong case. But investors may also be wary that MP2 Energy, owned by none other than Shell, may or may not have deeper pockets.

DUG last traded at $1.37/sh.

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