TIDMBLVN
RNS Number : 1626X
BowLeven Plc
17 February 2017
17 February 2017
Bowleven plc ('Bowleven' or 'the Company')
Corrections to statements made by Crown Ocean Capital P1 Ltd
(COC)
Following Bowleven's announcement on 15 February 2017 of the
posting of the Circular to convene the General Meeting, COC
released its own "open letter" to Shareholders on the same day (the
COC Open Letter).
Although the Board does not believe Shareholders are best served
by a series of public claims and counterclaims between the Company
and COC, there are ten significant errors in the COC Open Letter
that should not pass unchallenged.
The Board stands behind the entire contents of the Circular,
which was prepared after due and proper consideration of the
requisition notice from COC and took into account the proposals for
the future strategy and management of the Company set out in that
notice.
Directors' Remuneration and Cost Saving
COC claims: The Board were awarded remuneration totalling US$44
million over ten years.
Fact: The correct figure is US$33 million, as detailed in page
27 of the Circular. The combined total current annual salary of the
three executive Directors is approximately $1.08 million, which is
wholly in line with similarly sized industry peers.
It is worth highlighting that Bowleven was operator of Etinde
for the majority of the ten year historic period referenced, an
asset that both the Board and COC agree "bears an enormous
potential and value creation opportunity". The progression of the
asset through exploration success and the subsequent award of the
EA were all achieved under Bowleven's operatorship. Contrary to
COC's claims, management has implemented significant cost saving
measures and continues to do so, as outlined on page 25 of the
Circular. In addition, the Group has 24 staff, down from an
operating peak of around 70 in 2012, rather than the "more than 30"
referred to in the COC Open Letter.
Board Independence
COC claims: The Board has "questionable independence", with a
majority having a connection with Cairn Energy PLC (Cairn).
Fact: Four of the seven Directors are former employees of Cairn,
two of whom (Kevin Hart and Kerry Crawford) are executive
Directors. From a corporate governance perspective the concept of
independence is relevant to non-executives rather than
executives.
Two of the non-executive Directors, Philip Tracy and Tim
Sullivan, are also former employees of Cairn. Tim Sullivan's
employment by Cairn was for an 18 month period in 2012 and 2013
following Cairn's acquisition of Agora Oil and Gas in 2012 and a
commitment by certain Agora management to remain with the business
for a period after completion. This period of employment did not
overlap with the employment of any of the other Directors at Cairn.
Philip Tracy is not in any case considered fully independent
because of his previous service as Interim Operations Director of
Bowleven between 2011 and 2013. The three other non-executive
Directors are considered independent for the purposes of the UK
Corporate Governance Code, including Tim Sullivan and the new
chairman and senior non-executive Director appointed to the Board
in 2015.
In addition, the background of certain of the Directors as past
employees of Cairn should not, of itself, be worthy of criticism or
negative inference. Cairn is an established and high quality oil
and gas exploration and production operator, formerly part of the
FTSE 100 and with corporate headquarters in the same city as
Bowleven. Philip Tracy, Kevin Hart and Kerry Crawford contributed
significantly to the success of Cairn as members of senior
management before, during and after its transformational
discoveries in Rajasthan, India.
COC Board Proposal
COC claims: The proposed COC Board, comprising the two COC
nominees and David Clarkson, has "the relevant skills" and the
"highest corporate governance standards".
Fact: The structure and composition of the proposed COC Board
will not be compliant with the UK Corporate Governance Code or the
QCA Corporate Governance Code.
COC's proposed Board would also be wholly reliant on David
Clarkson for its "relevant skills" in terms of both oil and gas
industry experience and the continuity of Bowleven's important
relationships with its partners and the Cameroon authorities. As
set out in the Circular, David Clarkson unequivocally supports the
recommendation of the Board in relation to the COC proposals and
intends to vote against all resolutions at the General Meeting in
respect of his shareholding. There can be no assurance that David
Clarkson will agree to continue as a Director if the resolutions
are passed at the General Meeting.
Share Buy Back Authority
COC claims: The Board used the previous share buy back programme
to "temporarily influence the share price" and primarily in "the
Board's self-interest", and that COC would support the use of
"inverse share tenders" instead.
Fact: The Board has never used, and would under no circumstances
contemplate using, the purchase by the Company of its own shares to
influence the share price. To suggest otherwise is defamatory. In
addition, it is unclear why COC's alternative of buying back shares
through "inverse share tenders" should be more attractive to
Shareholders. A reverse tender approach would still require the
same buy back authority from Shareholders, against which COC voted
at the 2016 AGM, and would likely involve higher cost, more
administration and less flexibility.
2016 MBO Approach
COC claims: COC has never proposed backing a management buy-out
(MBO) of the Company, whether informally or otherwise, and that
"only the Board will know why it has made this suggestion".
Fact: The management of the Company was approached by COC in
2016 with a view to seeking their support for an MBO at a level
equivalent to the cash balance of the Company. COC expressed its
interest in funding the MBO by borrowing against the cash balance
held by the Company, apparently unaware of the incompatibility of
this proposal with UK company law. The Chief Executive Officer of
Bowleven met with a representative of COC on 15 August 2016, at
which COC was informed that a bid in the range contemplated by COC
was not capable of recommendation to Shareholders. This sequence of
events was reported to, and minuted at, a meeting of the Board.
Deferral of Vesting Date for LTIP Awards
COC claims: The recent vesting period for LTIP awards originally
made to management in 2013 was extended beyond the prescribed three
years to "avoid cancellation of the awards".
Fact: The 2013 LTIP awards would in fact have vested in full in
December 2016, to the benefit of management. However, management
agreed to defer the vesting of the awards in light of the wider
industry downturn and market conditions.
Carried Appraisal Wells on Etinde
COC claims: "it is no coincidence that drilling dates of
appraisal wells in Etinde have been constantly postponed in the
announcements of Bowleven despite NewAge - the project operator -
generally being very active on its other projects".
Fact: The implication that Bowleven is responsible, whether in
whole or in part, for delays in further Etinde appraisal drilling
is incorrect. Bowleven has consistently and publicly stated that it
is eager to drill the appraisal wells as soon as practicable, being
funded for its share of drilling and testing activities via the
US$40 million net carry. Bowleven's position on this matter has
been minuted at Etinde management committee meetings attended by
Lukoil and NewAge, the latter of whom, as operator, has primary
responsibility for planning and proposing annual work programmes
and budgets to the joint venture.
Circumstances of award of Bomono PEA
COC claims: Management "has chosen the route of settling for a
provisional exploitation authorisation (PEA)" on Bomono.
Fact: It is incorrect to describe the Board as "settling" for
the PEA. The decision to revise the original Bomono EA application
to a PEA application was taken after long consultation with the
Cameroon authorities, and on the understanding that an EA
application would follow in the longer term. In the meantime the
PEA entitles development of, and production from, the asset.
SNH Right to Back-in to Bomono
COC claims: SNH has waived its back-in right under the Bomono
PSC.
Fact: There has been no such waiver by SNH, and none is
expected. The right of the Cameroon state to back-in under the PSC
will only be triggered on award of the full EA for Bomono. The PEA
is awarded under the exploration phase of the Bomono PSC, and does
not trigger the right of the state to participate as a
co-venturer.
Lack of Transparency on Bomono Farm-out Discussions
COC claims: There is "complete lack of transparency about the
general structure of the announced potential farmout".
Fact: Until a binding agreement is reached on a farmout
transaction for Bomono, it would be premature, inappropriate and in
breach of commercial confidentiality obligations for the Company to
publicly disclose details of negotiation. The Board, having taken
advice to this effect, is entirely comfortable that it has complied
in all respects with its disclosure obligations in relation to
Bomono.
The Board reiterates its recommendation that Shareholders VOTE
AGAINST all resolutions at the General Meeting.
ENQUIRIES
For further information please contact:
Bowleven plc
Kevin Hart, Chief Executive 00 44 131 524 5678
Kerry Crawford, Finance Director
Brunswick Group LLP
Patrick Handley 00 44 207 404 5959
Will Rowberry
Cenkos Securities plc (NOMAD)
Derrick Lee 00 44 131 220 6939
Neil McDonald
GLOSSARY AND DEFINITIONS
All references to time in this announcement are to UK time.
AGM annual general meeting
AIM the market of that name operated by the London Stock
Exchange
Board or Directors the directors of the Company
Bomono or the Bomono Permit the PSC between the Republic of
Cameroon and EurOil Limited, dated 12 December 2007, in respect of
the area of approximately 2,328 km(2) , comprising former blocks
OLHP-1 and OLHP-2 onshore Cameroon; or, as the context may require,
the contract area to which that PSC relates
Circular the circular from to Shareholders dated 15 February
2017, incorporating notice of the General Meeting
EA exploitation authorisation
Etinde or the Etinde Permit the Etinde EA area, covering an area
of approximately 461 km(2) (formerly block MLHP-7)
Euroil Euroil Limited, Bowleven's wholly owned operating
subsidiary incorporated in Cameroon
General Meeting the general meeting of the Company convened for
14 March 2017, notice of which is contained in the Circular
Group the Company and its direct and indirect subsidiaries
LTIP Long Term Incentive Plan
NewAge NewAge (African Global Energy) Limited, a privately owned
oil and gas company
PEA provisional exploitation authorisation
PSC production sharing contract
QCA The Quoted Companies Alliance
Shareholder a holder of ordinary shares of 10 pence each in the
capital of the Company
UK or United Kingdom the United Kingdom of Great Britain and Northern Ireland
US$ United States dollars, the lawful currency of the United
States of America
This information is provided by RNS
The company news service from the London Stock Exchange
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(END) Dow Jones Newswires
February 17, 2017 02:00 ET (07:00 GMT)