LONDON (Alliance News) - The boardroom battle at Gulfsands Petroleum PLC was given further fuel on Friday after the company said Dubai-based Arawak Energy International Ltd has terminated the agreement between the two companies and has said it may recall its USD10 million loan to Gulfsands should the plans to remove its chief executive and commercial director be approved by shareholders.
Gulfsands said Arawak advised it that it the decision to terminate the agreement, which covers the development of new business opportunities in the Middle East and North Africa region, resulted from talks held with the company in recent days and public statements made by shareholders and non-executive directors of Gulfsands in recent weeks.
The Arawak loan has been a key component of the war of words between Gulfsands and Waterford Finance and Investment Ltd, its majority shareholder, as Waterford seeks to remove the company's chief executive and commercial director.
In addition, Arawak has confirmed that, in view of these events, it reserves all of its rights under the loan facility it has provided to Gulfsands, including the right to terminate its loan facility and to require repayment of all money advanced to the company under the deal. At present, Arawak has advanced a total of USD10 million to Gulfsands under the deal.
Should Arawak decide to terminate the facility and demand repayment, Gulfsands said it would be obligated to repay the full USD10 million, along with USD1 million in additional fees and expenses.
Waterford is calling for Chief Executive Mahid Sajjad and Commercial Director Ken Judge to be removed from their positions. The company's shareholders will vote on the proposal at an extraordinary general meeting, due to be held on February 3 after it was delayed from its original date of January 13.
Arawak also told the company that in the event of the removal of Sajjad and Judge, it will not hesitate to enforce its rights under the loan facility.
Owing to the development, Gulfsands said it has been forced to examine its options to ensure the availability of funding to repay the money under the Arawak facility should repayment be required and to ensure it has funding to continue trading.
Gulfsands shares were down 3.2% to 26.625 pence on Friday morning.
The boardroom battle at Gulfsands involves not only the push by Waterford to remove Sajjad and Judge, but also a call from another Gulfsands shareholder, Abdul Rahman Kayed, to remove Chairman Andrew West and Independent Non-Executive Directors John Bell and James Ede-Golightly. Waterford has defended the positions of West, Bell and Ede-Golightly, arguing it believes the company has a sufficient number of non-executives in place to ensure good corporate governance.
Waterford claims Sajjad and Judge should shoulder the majority of the blame for the underperformance of the company and for spending its cash reserves on assets which have "yielded no significant commercial results and no significant shareholder value", it said in a statement earlier this month.
It said Sajjad and Judge have been given higher remuneration than they would have received at peer companies, despite the company underperforming, in its view, and said the loan deal the company had negotiated with Arawak has put its assets at risk "on commercial terms".
In its statement issued earlier this month, Waterford said it thinks that if Sajjad and Judge remain in place, then Gulfsands' Moroccan and Columbian assets could be disposed of for nominal sums, its Syria assets could be disposed of to Arawak at a distressed price, while the two directors "could continue to receive excessive and unjustified remuneration in the context of the company's underperformance".
The Arawak loan has been central to the war of words between Gulfsands and Waterford. In December, Gulfsands attacked Judge for statements he made in an interview in which he suggested Waterford was aware of the talks Gulfsands had held with Swiss commodities trader Vitol SA concerning the Arawak loan and had timed the requisition of a general meeting in order to try and derail the deal.
Waterford responded to Judge's allegations, describing them as "completely false" and said it had written to him to clarify his statements. It also said it reserved the right to "initiate proceedings for defamation and malicious falsehood" against Judge.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
