LONDON (Alliance News) - The activist shareholder attempting to oust the majority of PetroNeft Resources PLC's board stepped up its efforts on Thursday after making several allegations against the company, including a claim the board have "squandered" almost USD250.0 million.
Although the activist shareholder, Natlata Partners Ltd, has outlined several reasons why it believes the current board of PetroNeft needs to go, it has still not provided much guidance on what its plan for the business would be should shareholders back Natlata's resolutions.
PetroNeft shareholders will vote on the proposals at an extraordinary general meeting to be held on April 18 in Dublin in the Republic of Ireland.
Natlata holds a 29.47% stake in PetroNeft, making it the company's largest shareholder, and is controlled by Russian businessman Maxim Korobov, who is proposing taking over as PetroNeft's acting chief executive.
Natlata has also proposed appointing two "independent" directors to the board, Anthony Sacca and David Sturt, whilst asking shareholders to support its propositions to remove four members of the current PetroNeft board - Non-Executive Chairman David Golder, Chief Executive Dennis Francis, Chief Financial Officer Paul Dowling and Executive Director David Sanders.
Natlata wants the two existing Non-Executive Directors of PetroNeft, Thomas Hickey and Gerard Fagan, to remain on the board for continuity purposes.
Natlata has been very vocal and critical of the PetroNeft board for years, having already made one failed attempt to remove the board in the past.
However, the board of PetroNeft tried to win over shareholders earlier this month by securing a USD35.0 million loan from its partner in Russia, Oil India Ltd, which is reliant on the current board of PetroNeft remaining in place.
That means shareholders will have to make a choice next month as to whether they want to remove the current board and face repaying the loan, something it can not currently do based on its financial position, or reject Natlata's resolutions and allow PetroNeft to continue as before.
The USD35.0 million loan was secured to fund a two-year work programme on the joint venture project on Licence 61, with USD10.0 million earmarked for 2016 and the rest for 2017.
Natlata, at the time, called that loan a "poison pill" and stressed Oil India had supplied a USD45.0 million loan back in 2014 which failed to increase production at the licence.
PetroNeft will no doubt see the advantage of executing the loan prior to the EGM next month, but has stood its ground over several years against Natlata, claiming last week that the proposed change in management could trigger several major risks for the company, including the loss of Licence 61.
Natlata stepped up its attack against the board on Thursday, stating the board changes are "vital" for the future of the company as it made several allegations against the current board, and responded to PetroNeft's decision to take out the loan from its partner.
"Following the Natlata EGM requisition they once again suddenly revealed a work programme which is supposed to change everything, financed by a USD35.0 million shareholder loan from Oil India on terms which are, once again, not being communicated to shareholders, so we are left to guess," said Natlata.
"Although the board's role is to protect shareholders' interests they once again made this financing arrangement subject to them preserving their own employment," Natlata added.
Natlata claims the current PetroNeft board has allowed production to decrease whilst mismanaging the company's finances to a "staggering degree," claiming the board has "squandered" almost USD250.0 million on investment without actually increasing production.
The shareholder also claimed PetroNeft has presided over a "disastrous USD500.0 million loss in market value" despite injecting several tranches of capital into the company, highlighting most of that value was lost before the fall in oil prices which started in the middle of 2014.
"During the entire five year period of missed targets, disastrous share-price performance and financial mismanagement only one thing has been constant, and this has been the salaries the board have been paying themselves," said Natlata.
PetroNeft has previously made several claims that the resolutions proposed by Natlata should not be considered as the shareholder has supplied little to no information regarding what its plan for the business would be should shareholders support the board change.
PetroNeft has claimed that allowing Natlata to change the board could lead to the company's strategy being changed or to related-party transactions being undertaken that could be to the "detriment of the independent majority of shareholders", adding that the new board could also seek to cancel the company's shares from trading.
Natlata tried to address that point on Thursday, but was ultimately very vague and failed to outline a detailed strategy.
Natlata said it would examine what has gone wrong with the company and then present a new plan to shareholders, ensuring shareholders were fully informed about the process.
Importantly, Natlata said it would look to appoint a new team to the company that would be able to implement its new plan.
"To put in place new people, to cut management and operational costs in both Russia and Ireland and to move the focus of management to Tomsk, where the company's assets are," said Natlata.
Korobov, the man hoping to take over at the helm of PetroNeft, said he understood why shareholders would be wary of changing the management of the company but believes he can put the company back on track.
"Some of you believe that the better devil is the one you know, but you know in your hearts all too well what will happen if you again award your trust to the current board: stagnant or declining production, new debt, attempts to blame anybody and anything but not themselves," said Korobov.
"In order to unlock its value Natlata wishes, with your support, to change the board and put the company back on track. I have confidence that the proposed new board under the leadership of David Sturt and myself, Maxim Korobov, will do just that. I hope that you share this vision," he added.
PetroNeft has not released a response to Natlata's statement published Thursday.
PetroNeft shares were down 1.9% to 2.06 pence per share on Thursday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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