31 Mar 2016 11:17
Board Changes are vital for future of PetroNeft, says Natlata
London 31 March 2016. Natlata Partners Limited ("Natlata"), the private investment company that is the largest single shareholder in PetroNeft Resources PLC ("PetroNeft" or "the Company") (AIM: PTR) has today published a letter to shareholders outlining why it is clearly in their's and the Company's interests for them to vote for Natlata's proposals at the Extraordinary General Meeting ("EGM") due to be held in Dublin on 18 April 2016.
Natlata proposes that Dennis Francis, David Sanders, Paul Dowling and David Golder are removed as directors of the company and that the following are elected in their place:
· Anthony Sacca, independent, a senior financial executive with a successful career as a partner at PwC, and later as the CFO of a major Russian corporation. He has worked in Russia since 1995 and has a deep understanding of the Russian business environment and debt restructuring.
· David Sturt, independent, a highly experienced Oil and Gas industry professional with nearly 30 years' experience with a proven successful technical track record and a wealth of capital markets experience
· Maxim Korobov, to be acting CEO, the beneficial owner of Natlata, a successful businessman with over 20 years' experience in the Russian Oil and Gas
Natlata hopes that existing directors Thomas Hickey and Gerard Fagan will remain on the board for the purposes of continuity. The new board will therefore have four independent directors and one Natlata nominee, to ensure that there will be a significant independent majority and that the interests of all shareholders will be secured.
Natlata believes that these changes are necessary because the last few years have demonstrated beyond all doubt that the current board clearly do not have the right capability and experience to maximise the company's assets:
· They have presided over decreasing production and mismanagement of the company's finances to a staggering degree.
· They have squandered approaching $250m with no material increase in production.
· They revealed the farmout to Oil India Limited ("OIL") nearly two years ago which at the time was justified as it would revitalise the company. Two years later, having spent the $45m there is no material improvement in production. Regrettably, in addition to the stagnation of production half of that production has been lost to OIL. This is now leading to the latest new round of debt financing and consequent further destruction in shareholder value.
· They have belatedly started horizontal drilling but have not encountered the hoped for production increases, blaming a range of issues for missing their targets. We warned two years ago that the drilling of such wells is fraught with dangers, especially where 3D seismic is not utilised in the planning stage.
· Following the Natlata EGM requisition they once again suddenly revealed a work programme which is supposed to change everything, financed by a $35m shareholder loan from OIL on terms which are, once again, not being communicated to shareholders, so we are left to guess. Although the board's role is to protect shareholders' interests they once again made this financing arrangement subject to them preserving their own employment.
· They have presided over a disastrous $500m loss in market value despite numerous capital injections and most of this fall occurred well before the more recent oil price falls.
· 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.
If successful with their proposals at the EGM Natlata believes that the new board should put in place a four-step plan:
1. To carry out a full examination to find out what has gone wrong with the company: why has an apparently experienced management team failed to get oil out of the ground despite spending a huge amount of money and resources; and why it consistently misses targets they themselves have set.
2. To present the new plan on how to restore and develop PetroNeft as well as a new proposed team capable of implementing the plan to shareholders at the AGM 2016.
3. 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.
4. To keep shareholders fully informed throughout implementation of the forward plan to improve transparency.
Summing up his letter to shareholders, Maxim Korobov, said:
"I fully understand that many of you will be wary of taking the risk of changing the management of your company. 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. This management has done little to show that it deserves your support, and much to show the opposite. I currently see potential in PetroNeft and its share price. 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."
ENDS
About Natlata Partners Limited
Natlata Partners is a private investment company that seeks out investments with a focus on Russia and CIS countries that appear to be distressed or are at an early stage of development and which will clearly benefit from effective management and proven sector experience. For more information about Natlata and our investments please contact info@natlata.com. More information can be found at www.natlata.com.
For media enquiries please contact:
Stuart Leasor leasor@em-comms.com +44 7703 5377211
or
Tom Blackwell blackwell@em-comms.com +7 919 102 9064