Worldview Capital Management: Major Shareholder of Exillon Energy Plc to
Requisition Extraordinary General Meeting for Board Overhaul and Strategic
LONDON, January 14, 2013
LONDON, January 14, 2013 /PRNewswire/ --
Reasons for EGM:
*Exit from FTSE-250 following share price plummet of over 60% since the
$280m placing at 400p in March 2011
*Board inexperience has led to ineffective management of assets and
communication of a distinctly misleading impression of production
*Ongoing corporate governance failings and significant underperformance
against production forecasts
E GM will call for:
*Removal of current Chairman
*Appointment of 3 New Non-Executive Directors well-qualified to review the
Company ' s strategy, assets and operations and contribute to its
Worldview Capital Management ("Worldview"), the Swiss-based investment
manager, has begun the formal process of requisitioning an EGM at former
FTSE-250 constituent, Exillon Energy plc ("the Company") (EXI.L), an
independent oil producer with assets in Northern Russia. Worldview are seeking
the removal of Chairman, David Herbert, and the appointment of 3 new
Non-Executive Directors. This follows a more than 60% decrease in the oil
firm's share price following the $280m placing in March 2011 and a series of
production setbacks. Worldview believe this performance is the result of an
inappropriate Board who have implemented a flawed operational strategy and
overseen a period of serious corporate governance failings.
Worldview's call for an EGM comes as a last resort following a period of
attempted engagement with the Board since May 2012.
Purpose and role of proposed new Non-Executive Directors
With a clear focus on recovering shareholder value, the proposed new Directors
would provide vital operational and sector experience where the existing Board
is currently weak. Worldview have major concerns regarding the Company's
current strategy and portfolio management. The new Directors' experience will
play a crucial role in developing and executing the most appropriate strategy
and driving operational performance improvement, whilst immediately improving
corporate governance at the Company.
Underperforming and inappropriate existing Board
Non-Executive Chairman, David Herbert, and Chief Executive, Mark Martin, were
appointed in 2011, without a proper search process, despite both lacking
relevant E&P experience. Under their tenure the Company has experienced
production setbacks on two occasions. In the period from David Herbert's
appointment on 28 April 2011 to date the Company's shares have underperformed
the FTSE 350 Oil and Gas producers index by 65% and the Russian RTS index by
60%. Furthermore, during this time the Company has also dropped out of the
FTSE-250, with the share price falling sharply (from 468p to 146p). In the
absence of news of significant progress, Worldview believe that recent share
price appreciation is the result of its share purchase programme that took
place during the second half of 2012.
The absence of a Finance Director further demonstrates that the Board lacks
the expertise to properly manage the Company's activities.
Flawed strategy and ineffective portfolio management
Worldview believe that the Board has the wrong strategic focus by developing
its high risk and less profitable assets in the Russian region of
Timan-Pechora, which is diverting capital and other resources away from
developing its assets in Western Siberia that have been shown to produce
This view has been echoed by Otkritie Capital, an independent firm of brokers
covering the Company, who stated in a research report in November 2012: "We do
not support the company's aspiration to invest in Timan-Pechora due to the
higher drilling costs and lower flow rates than in West Siberia. Nor do we
support infrastructure spend ahead of production growth."
Lack of independence
There remain significant questions over the independence of the current
Exillon Board. David Herbert and Mark Martin were UK bankers from Exillon's
sponsoring investment bank. They were appointed to the Board as Chairman and
CEO shortly after a major fundraising by Exillon and sell-down by the
principal shareholder, Maksat Arip, of $130 million conducted at the Company's
near all time share price high.
Since that time the role of Mr Arip, who at the time of his resignation as
Executive Chairman, was simultaneously appointed CEO of the Company's
subsidiary companies has remained unclear. The latest annual report refers to
Mr Arip as a "consultant" rather than an employee or by his announced title.
Nevertheless, "Mr Arip assisted the Remuneration Committee in its decision
regarding the remuneration of Mr. Martin [and] of Mr. Herbert" (Annual Report
This concern is reinforced by the fact that there appears to be precedent for
this type of management manoeuvre by Mr Arip. When he stepped down as Director
and CEO of Kazakhstan Kagazy plc ('Kagazy'), a London Stock Exchange-listed
industrial group of which he was a principal shareholder, Mr Arip continued to
hold the position of Director of its principal operating subsidiary "in order
to focus [his] time on the strategy and business development of the Group" and
that he would "continue to perform the same duties as [he had] to date".
(Kagazy RNS 30 April 2008). Having raised $250 million on IPO in 2007, Kagazy
is understood to still be negotiating restructuring terms with its creditors
that have been ongoing since it first defaulted on over $100 million of bonds
in November 2009 (Mr Arip having resigned as Director of Kagazy's principal
operating subsidiary in July 2009 and disposed of his entire interest in
Kagazy in September 2009 (Kagazy RNS 24 September 2009). Moreover, there are
concerns that there may have been inadequate and misleading disclosure in
Exillon's most recent prospectus regarding the Kagazy debt restructuring.
Misleading production figures
Worldview believe that the Company's recent production announcements continue
to be misleading. As a case in point, they regard the announcement on 7
January 2013 detailing 2012 production results as exemplifying this concern.
Worldview notes the inclusion of data in the year end production report for
"peak production". Peak production is not a performance indicator that is in
accordance with industry norms or best practice and in Worldview's view is
easily manipulated and therefore cannot be used to suggest that the Company
has met its production targets for 2012. The reality is that the actual
average daily production has in fact fallen below guidance for both the full
year (12,862bopd vs 14,303bopd or minus 10%) and for the final quarter of 2012
(15,218bopd vs 17,398bopd or minus 13%). In addition, it is well below the
forecast average daily production from proven reserves as projected in the
Company's independent geological report in February 2012 (12,862bopd vs
18,760bopd or a 31% shortfall).
The issue of governance was brought into sharper focus in April 2012 when
Exillon was fined £292,950 by the FSA for its failure to identify and disclose
payments of almost £1 million to Mr Arip whilst he was Executive Chairman.
Breach of listing rules/ misleading information
Other corporate governance issues that shareholders are eager to see addressed
include numerous examples of non-disclosure of key investor information such
as the Company's prospectus and an accurate biography of its Chairman. During
the appointment of Chairman, David Herbert, his previous Chairmanship of
AIM-listed Timan Oil and Gas - a company that lost 88% of its value following
its LSE AIM IPO under his stewardship - was not disclosed.
Worldview is also demanding to know why a remuneration package was agreed for
CEO, Mark Martin, which included a salary of $825,000 p/a plus benefits -
almost three times the amount of his predecessor - and a share package worth
over £10 million at the point of issues, without any performance-related
EGM request and call for change
Worldview Capital Management, a significant shareholder in Exillon, has begun
the formal process of requisitioning an EGM in the conviction that the
introduction of new, qualified and experienced Board members, including two
independent candidates who were identified following a thorough and
professionally run search process, can address the issues currently
undermining Exillon's operational and share price performance.
Restoring shareholder value - addressing strategy, portfolio management,
executive and Board leadership, eliminating governance failings and assessing
and improving operational performance.
Worldview is proposing the introduction of three new Board members with the
relevant experience to evaluate the current operational strategy and ensure
corporate governance standards in order to help realise the true underlying
value of Exillon's assets and restore shareholder value.
Proposed Non Executive Candidates
Yves Mérer - Highly experienced oil executive with significant emerging market
experience and a wealth of international oil and gas experience acquired
over a 30-year career with Shell that included:
*Governance of Shell's regional business interests in French-speaking West
*General Manager of Salym Petroleum Development in Siberia, Shell's first
successful E&P Russian joint venture business
*Chairman of Shell Syria
*President of Shell China Exploration and Production
*Shell Iran Country Chairman
He is currently Chief Executive of Caithness Petroleum,a privately owned,
British independent oil and gas exploration and production company.
James Dewar - Qualified chartered accountant with 30+ years of experience in
senior international roles
*Held a number of Vice President and global/regional business CFO and
finance roles for BP in the UK, Dubai, Kuwait, Indonesia, Singapore and
the United States of America in multi $ billion businesses during a 27
*More recently, Mr Dewar was Group CFO for Dana Gas PJSC, based in the
United Arab Emirates, an upstream and mid-stream gas company with assets
of $3 billion, quoted on the Abu Dhabi Stock Exchange. He then served as
interim transformational CFO for Seven Energy International in 2011.
He is currently a Non-Executive Director of East West Petroleum Corporation (
TSX .V: EW), sits on the Advisory Board for Viking Services and is a
Non-Executive advisor to Atlantic Energy, a privately owned UK and Nigeria
based energy company.
Andrey Kruglykhin - Founding Partner and Chief Compliance Officer of Worldview
Capital Management with significant oil and gas and turnaround experience in
companies with management and governance failings, minority shareholders '
rights, and corporate governance
*More than 15 years' experience in the oil & gas industry and financial
sector - currently Partner and Chief Compliance Officer at Worldview
*Other current roles include as Executive Chairman at Bulgarian Stock
Exchange-listed ELARG Agricultural Land Opportunity Fund REIT;
*Has worked in advisory roles in the asset management industry since
2006, managing complex turnaround situations in Eastern Europe and
*Previous roles include as Senior Advisor with QVT, Senior Advisor at
ING Bank, London, CEO of Petrol Holding in the Bulgarian part of
Naftex Group, a downstream oil company with an annual turnover of
more than €500m and Deputy Director of Business Development at RITEK,
a Russian upstream oil company;
*Holds a PhD in Petroleum Economics from Gubkin Russian State
University of Oil and Gas, Moscow; MSc in Physics from the Moscow
Institute of Physics and Technology (University); Certificate in
Crisis Management; CDip AFAskeri-ACCA; attended the Trium Global
Executive MBA program issued by LSE, NYU, and HEC.
Worldview Capital Management Partner and Chief Compliance Officer, Andrey
"We have invested significantly in Exillon andcurrently control 13% of
theCompany's shares.This reflects our view that Exillon has a number of
attractive assets, which have the potential to deliver significant returns.
The proposed new, experienced team at Board level will bring about the vital
changes needed to unlock the true value of these assets. It is for this reason
that we have informed the Company that we are requisitioning an EGM, having
been unable to constructively engage with the Board since May 2012.
We believe that now shareholders are in full possession of this information,
and have a clear opportunity to remedy the situation and restore shareholder
value, we can count on their support to vote for these changes."
Notes to Editors:
Worldview Capital Management is an investment management group based in
Switzerland and UK (FSA authorised), which controls votes of more than 13% of
the share capital of Exillon Energy.
Enquiries: Hudson Sandler: Charlie Jack/Andrew Hayes/ Charlie Barker
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