Palo Alto Investors Reiterates Demands for Changes at Canadian Superior Energy

Business Wire, April 01, 2009

Issues Open Letter to Company’s Board of Directors, Alleges “Failings, Misconduct and Inadequate Corporate Governance”

PALO ALTO, Calif. -- Palo Alto Investors, LLC, an investment advisory firm, today issued the following Open Letter to the Board and Shareholders of Canadian Superior Energy, Inc. (TSX:SNG) (AMEX:SNG):

Open Letter to the Board and Shareholders of Canadian Superior Energy Inc.

Palo Alto Demands Better Governance

Palo Alto Investors, LLC (“PAI”) provides this open letter to the Board of Directors and shareholders of Canadian Superior Energy Inc. (“Canadian Superior” or the “Company”) to further expose the failings, misconduct and inadequate corporate governance of the current Board and again demand that the Board be reconstituted to include truly independent Directors with relevant international oil and gas expertise.

We believe that a new Board will ensure that the Company is effectively equipped for future success, particularly as it emerges from court-approved creditor protection. As further documented below, the existing Board has failed in its duties to shareholders, including:

• the management of the Company’s key growth asset (Block 5(c) in Trinidad) has been placed in the hands of a court-appointed receiver;
• the Company itself has sought and obtained protection from its creditors pursuant to the Companies Creditors’ Arrangement Act (the “CCAA”); and
• Challenger Energy Corp. (“Challenger”) (CDNX:CHQ.V), a company of which Mr. Greg Noval, Canadian Superior’s Executive Chairman, is the largest shareholder, was inappropriately loaned $14 million by Canadian Superior in September 2008, and now Challenger itself has also sought and obtained creditor protection under the CCAA.

The key driver of our desire to reconstitute the Board is the need to remove the Company’s Executive Chairman, Greg Noval, who has insurmountable conflicts of interest which are described in greater detail below.

For the reasons described below, on February 17, 2009, PAI requisitioned a meeting of shareholders to consider PAI’s alternative slate of directors. PAI will be preparing a dissident proxy circular which will set out its alternative slate of directors for election at the Annual and Special Meeting of shareholders of the Company called for June 26, 2009. The dissident proxy circular will be publicly filed and will be mailed to all shareholders. This open letter to shareholders is intended to highlight some of the significant concerns and issues that we will be explaining in greater detail in our dissident proxy circular.

PAI is a Committed Long-Term Shareholder

PAI has been a significant shareholder of the Company since 2003. PAI has consistently invested in the Company’s equity financings, including its August 2005 offering, the proceeds of which were used to pay the Company’s costs for the acquisition, drilling and development of the Block 5(c) project in Trinidad and Tobago. PAI has since provided continued assistance to the Company, both through participating in subsequent financings and sharing its industry contacts with management, as PAI believes in the Company’s strategy of exploration in Trinidad. Most recently, PAI participated in the Company’s September 2008 equity offering, which raised $35 million to fund the Block 5(c) drilling program.

PAI owns 15,752,500 common shares of Canadian Superior, representing 9.3% of the Company’s outstanding shares. As such, PAI is one of the Company’s largest shareholders.

Chairman Noval’s Conflict of Interest

Unfortunately, since September 2008, PAI has been forced to actively address the significant ongoing conflict of interest of the Company’s Executive Chairman Greg Noval. This conflict, along with the complicity and failure by the Company’s Board of Directors to adopt and enforce appropriate and necessary governance controls for a public company, makes it impossible for the existing Board to act in the best interests of Canadian Superior shareholders. Mr. Noval’s conflicts of interest include:

• Mr. Noval is the Executive Chairman of Canadian Superior, giving him significant influence over the Board. As a principal of the Company, we believe he is also authorized to execute contracts, make hiring decisions and spend the Company’s funds with limited oversight. Mr. Noval owns or controls 480,044 Canadian Superior shares, representing only 0.03% of the issued and outstanding shares of Canadian Superior.
• Mr. Noval is the founder of, and a significant investor in, Challenger, with which the Company has entered into certain imprudent commercial arrangements, as more fully described below. Based on public information, Mr. Noval owns or controls 4,306,200 shares of Challenger, representing approximately 10.1% of the issued and outstanding shares of Challenger. Based on public filings, Mr. Noval also owns warrants and options entitling him to acquire up to 1,000,000 additional Challenger shares at varying prices, which, if exercised, would increase his ownership interest in Challenger to 12.4%.
• Until October 23, 2008, Mr. Noval was also the Chairman of the Board of Directors of Challenger, meaning that at the time of the bridge loan made by Canadian Superior to Challenger, as described below, Mr. Noval was Chairman of the Board of both Canadian Superior and Challenger.