Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe Now
Biglari Holdings says it was deceived into buying a Texas oil company after being falsely told that the assets included a dormant drilling rig worth $8.4 million that Biglari eventually had to sell for $200,000.
Biglari, an Indiana corporation with headquarters in San Antonio, Texas, makes the allegations in a lawsuit filed this week against Robert L.G. Watson, former CEO of the Abraxas oil company.
Biglari, owner of the Indianapolis-based Steak n Shake restaurant chain, alleges that Watson fraudulently misrepresented Abraxas’ valued assets when Biglari was negotiating to acquire the company.
The Indiana Lawyer left a telephone message and sent an email to Watson but did not immediately receive a response.
According to the complaint, Abraxas ventured outside of its West Texas oil drilling base in 2008 and into North Dakota.
After unsuccessful attempts to drill oil in North Dakota’s Bakken region, Abraxas purchased a 2000 HP oil rig from a salvage yard in 2011, cobbling it with spare parts to try drilling again.
However, Abraxas was forced to cease its drilling in North Dakota after a drop in oil prices between 2012 to 2015.
According to the complaint, Abraxas had marked the 2000 HP oil rig as a corporate asset worth $8.4 million in 2015, but stopped depreciating it any further after it had been idled.
The rig remained idle for over eight years, until it was sold in 2023 after Biglari acquired it, the complaint stated.
Biglari alleges that Abraxas also concealed that two of its idled oil wells were found to have violated the North Dakota’s environmental regulations.
Biglari, which had separately acquired a controlling interest in another oil and gas company in 2019, thought Abraxas could be another opportunity to expand its presence in the industry.
Through negotiations with Watson, Biglari purchased all shares of preferred stock of Abraxas held by AGEF for $80 million.
“Biglari took this risk because it reasonably relied on the representation made by Watson to Biglari and on the Abraxas books and records maintained by its accounting department and audited by outside auditors,” the complaint stated.
Eventually, Biglari said it concluded that the devalued, idled oil rig needed to be sold as soon as possible. In February 2023, Biglari sold the rig for $200,000.
Biglari is seeking a jury trial and requesting compensatory damages.
The case is Biglari Holdings, Inc. v. Robert L.G. Watson (49D01-2511-CE-054959)
Please enable JavaScript to view this content.