LONDON, April 22, 2014 /PRNewswire/ --
Natlata Strongly Objects to Board Securing Their Own Future as Pre-Condition
Natlata Partners Limited ("Natlata"), the private investment company that is the largest single shareholder in PetroNeft Resources Plc ("Petroneft"), notes Petroneft's announcement of 17 April 2014 regarding the farm-out agreement with Oil India Limited ("OIL").
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Natlata has always said that it is not against the principle of a farm-out and that it would support a deal if it was at the right price and with the right terms. On the information so far released it has difficulty to see if the announced farm-out fulfils these criteria, as:
Natlata believes that, as ever, with such complex deals, the devil is in the details, of which the Board has characteristically provided very few. If the deal is as attractive as suggested, Natlata would consider supporting it. Unfortunately the announcement only provided clarity with respect to USD35m, while the rest of the money is or may be subject to the current management actually delivering on its promises - which, Natlata notes, should sound alarm bells for shareholders, if past performance is anything to go by.
Natlata also finds it inappropriate that the Board should seek to guarantee their future employment with the company as a condition of delivering much-needed financing. This is the latest example of questionable corporate governance from a Board that appears to look after itself before shareholders. The same Board that has already burnt through USD200m with so little to show for it will retain sole discretion of the use of new funds. It will also be free to continue hiring the same drilling contractor owned by a member of the PetroNeft Board, that has until now failed to deliver, with nothing to suggest that the contractor will have a sudden reversal in fortune.
With respect to the headline figure of USD85m, whilst this is a superficially attractive one, critical details are lacking. Natlata therefore urges the Board to answer the following questions, before it can decide whether it will support the transaction or not, and suggests that other shareholders stay their decision on how to vote until they have heard the answers:
It is noted that OIL has the right to "second certain technical experts into PetroNeft's Tomsk team. OIL also has the right to become the Operator of the Licence should there be a substantial change in the management team of PetroNeft within the first three years."
Maxim Korobov, Natlata's controlling shareholder, said:
"I am pleased to see that shareholders are now going to be given a say on this deal, however I am extremely concerned that the Board has effectively given an ultimatum saying that shareholders either have to accept the status quo in the management of the company or the transaction will not happen at all. Moreover, we disapprove of the Board's decision to call an EGM 45 minutes before our own, which is clearly an attempt to prevent shareholders from having a full discussion of the key issues that have been raised. This smacks of the high-handed corporate governance that all shareholders have seen from this Board for too long. My fear is that without fundamental change this will be yet another case of the Board of PetroNeft diluting shareholders and wasting even more money, with little or no result and at the same time securing a comfortable position for themselves."
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 details on our proposals for PetroNeft can be found at http://www.value4petroneft.com.
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