LONDON (Alliance News) - The new board of Sefton Resources PLC on Thursday said it is still in the early stages of rebuilding the company as it tries to clear up the mess that it says was left behind by the previous management, stating the board is progressing legal cases and has offloaded some assets to trim its financial obligations.
Sefton has been in turmoil for some time now, including a lengthy battle between its major shareholders and the board of the oil and gas company, which eventually led late last year to an overhaul in management.
Sefton is now run by a new team headed up by one of the founders of financial information website ADVFN PLC, with ADVFN Chief Executive Officer Clem Chambers taking over as chief executive of Sefton as well. The other founder of ADVFN, Chairman Michael Hodges, is a Sefton non-executive director.
The only Sefton board members who survived the changes were Executive Chairman Jossy Rachmantio and Non-Executive Director Tom Milne, who complete the current four-member board set-up at Sefton.
Although the shuffle in management was supposed to take Sefton on a new course, the legacy left behind is still taking its toll after Sefton revealed last year there had been an "aggressive dissipation" of the company's funds leading up to Chambers and Hodges joining the board.
Chambers said at the time of the discovery, which was in early November, that he "feared the worst" was yet to come for the already challenged company because the actions of the board prior to his appointment appeared to be to the "serious detriment of shareholders".
After months of evaluating the company, the new board of Sefton published a statement on Thursday which said some restructuring progress has been made since last year as it begins to rebuild the firm, but admitted the company is moving forward at a very slow pace.
"Things have been moving slowly for Sefton. This is due to Sefton being a [British Virgin Islands] company and complexity now very much frowned on by UK and US corporate service providers. The scorched earth policy of the previous management has also slowed your board down," said Chambers.
Offshore companies, which are usually set up for tax benefits, are not uncommon among London listings, but there has been increasing media attention on the issue following the publication of the Panama Papers.
"There are pros and cons of being a BVI company, but contrary to what the newspapers would have you believe, an offshore company comes under extremely heavy scrutiny when it tries to do anything at all. The level of [know your customer] that needs to be provided for such a restructure is extreme and relies on much to-ing and fro-ing and delay," Chambers added.
Chambers said the new management had no formal handover with the previous board, which will not be a surprise to shareholders, meaning it has been a "long-winded" process, but Chambers said he is confident that the bulk of the issues are now behind Sefton.
In the first major move by the new board, Sefton has "cut the US bleed" by selling assets it held in Kansas for "a peppercorn" of USD5,000, ridding Sefton of lease renewal, equipment maintenance and tax payments, stemming a drain on the company's resources.
"None of the 'assets' were of a practical commercial value at the current oil price, or for that matter at any foreseeable oil price. Maintaining the optionality value of the Kansas situation would have quickly drained the company's cash to nothing," said Chambers.
Whilst Sefton figures out how to rebuild the company by finding new opportunities, the new board is currently dealing with a legal case that was brought against the company by former Executive Chairman Jim Ellerton, who had lodged a claim back in May 2015 prior to the management shuffle last year.
Ellerton filed claims against Sefton, two directors and one former director, claiming damages related to his resignation from the company's board, the termination of his consulting contract, and a deal with Hawker Energy. That was followed by Ellerton filing an involuntary petition under Chapter 7 of the US bankruptcy code to try to force the company into bankruptcy.
Chambers said the case with Ellerton has been progressing to Sefton's satisfaction and said recent developments have been in the company's favour after Ellerton was ordered to pay the company USD140,000 to cover its legal costs.
Sefton said it has placed a lien on Ellerton's property to cover those costs, meaning it has the right to keep his property until the debt is paid. Despite that, Chambers said his expectations of any kind of recovery are "very modest".
However, Sefton has managed to claw back USD75,000 worth of its legal costs from its insurance policy, and the company is expecting further legal costs to be recovered under the policy going forward.
"Litigation is an expensive process, so our insurance kicking in is a relief. We expect legal issues to drag on, but we are hopeful their impact will no longer be material beyond the time and effort spent," said Chambers.
Chambers conceded it has taken a long time to get Sefton into its current position, even though there is still a lot to do as he said rebuilding the firm is still in its "early stages".
"Now your board has its hands on all the various corporate levers it has begun a range of discussions and in our opinion there are opportunities worth pursuing," said Chambers.
"Meanwhile, the accounts are being prepared and we will update you when they are released or before if there is anything material to report," he added.
Sefton shares were cancelled from trading on AIM in November.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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