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Tuesday 24 January, 2017

Crown Ocean Capital

Requisition for General Meeting of Bowleven PLC

RNS Number : 9052U
Crown Ocean Capital P1 Ltd
24 January 2017
 

24 January 2017

 

Crown Ocean Capital P1 Ltd

 

Re: Requisition for a General Meeting of

Bowleven PLC

 

Crown Ocean Capital P1 Ltd ("Crown Ocean"), a private investment company, which owns over 10% of the issued ordinary share capital Bowleven PLC ("Bowleven" or "the Company"), has sent to the Company a requisition for a General Meeting of Bowleven, the details of which are set out below.

 

Enquiries:

Square1 Consulting Limited                                                                             +44 207 929 5599

David Bick

Jos Burnett

 

 

 

 

To:          The Directors of Bowleven PLC
            The Cube
            45 Leith Street
            Edinburgh
            EH1 3AT

24 January 2017

NOTICE TO REQUISITION GENERAL MEETING (AND SPECIAL NOTICE OF ORDINARY RESOLUTIONS TO BE PASSED AT SUCH MEETING) OF BOWLEVEN PLC (the "Company")

Pursuant to section 303 of the Companies Act 2006 (the "Act") and the Company's articles of association, we, the undersigned, holding an aggregate of not less than 5 per cent of the paid-up capital of the Company carrying the right to vote at general meetings as at the date of this requisition, hereby request and require the directors of the Company to convene a general meeting of the Company (the "Requisitioned General Meeting"), the  general nature of the business of which will be the composition of the board of directors of the Company. We confirm that we hold all of the ordinary shares of the Company registered in our name otherwise than on behalf of another person.  The following ordinary resolutions are intended to be moved at the meeting:

ORDINARY RESOLUTIONS

1.          THAT Christopher John Ashworth be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).

2.          THAT Eli Chahin be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).

3.          THAT William MacDonald Allan be and is hereby removed as a director of the Company.

4.          THAT Kerry Crawford be and is hereby removed as a director of the Company.

5.          THAT Kevin Hart be and is hereby removed as a director of the Company.

6.          THAT John Martin be and is hereby removed as a director of the Company.

7.          THAT Tim Sullivan be and is hereby removed as a director of the Company.

8.          THAT Philip Tracy be and is hereby removed as a director of the Company.

9.          THAT any person appointed as a director of the Company since the date of the requisition of the general meeting of the Company at which this resolution is proposed, and who is not one of the persons referred to in the resolutions numbered 1 to 8 (inclusive) above, be and is hereby removed as a director of the Company.

Upon resolutions 1 to 9 (inclusive) taking effect, the total number of the directors of the Company shall be three and we hereby give you special notice of such resolutions in accordance with section 312 of the Companies Act 2006.

We enclose notices in writing signed by each of the persons referred to in resolutions 1 and 2 of their willingness to act. We have also appended to this letter details of each of the persons referred to in resolutions 1 and 2 which satisfy the requirements of section 163 of the Companies Act 2006. On appointment of a proposed director, we undertake to procure that details to fulfil the requirements of section 165 of the Companies Act 2006 are provided to you.

We further enclose at Appendix 1 a statement with respect to the matters referred to in the resolutions above (the "Statement") which, in accordance with section 314 of the Companies Act 2006, we require the Company to circulate to those members receiving notice of the Requisitioned General Meeting.

Unless the Company resolves otherwise, in accordance with section 316(2) of the Companies Act 2006 we hereby undertake to pay the expenses of the Company in complying with section 315 of the Companies Act 2006 and enclose a cheque for the sum of £7,000, being our good faith estimate of the sum reasonably sufficient for the Company to meet its obligations to circulate the Statement in accordance with section 315 of the Companies Act 2006. If the actual expenses of the Company in complying with section 315 of the Companies Act 2006 exceed such amount, we undertake to pay to you such additional sum on demand.

Dated:

 

Name of Registered Holder                                        Number of Ordinary Shares              

Crown Ocean Capital P1 Ltd.                                       34,000,000

 

 

 

 

Christian Petersmann, Director                                                            Konstantin Stoyanov, Director

 

 



 

Appendix 1

 

Supporting Statement

 

Crown Ocean Capital believes that the strategy of the proposed and revised Board for value realisation should be to:

 

·      Cut Bowleven's spending of cash on general and administrative expenses

 

·      Initiate an immediate review tasked with making recommendations to the revised Board how to efficiently transform Bowleven into a holding company which:

 

a)  Returns excess cash holdings to shareholders

 

b)  Creates an alignment of stakeholders in the Etinde project ("Etinde") - Bowleven's most valuable asset

 

c)   Identifies the route to value maximisation from Etinde over time

 

d)  Ceases further spending on the Bomono project ("Bomono") and conducts an independent review of the estimated over $100 million spent on Bomono to date

 

We expect Bowleven's shares to significantly appreciate upon the adoption of this strategy as market price implied uncertainty over cash spending and monetisation of assets is being removed with further material upside from Etinde over time.

 

 

The compelling need to change the board

 

The continued expenses and recent cash outflows at Bowleven are alarming. We believe shareholders are exposed to material risk that Bowleven will spend its remaining cash of c$97 million and destroy remaining value. The record of shareholder value destruction is evident: Capital markets assign a negative enterprise value with cash holdings exceeding Bowleven's market value at the end of 2016.

 

Over the last 10 financial years, Bowleven had an estimated $550 million of cash outflows (net of farm-out proceeds) including an aggregate remuneration of the directors of an estimated $44 million, whilst Bowleven's equity interest in Etinde dropped from 100% to 20%.

 

We question the current Board's approach, because:

 

-     Costs continue to be incurred on Bomono and further activities are planned despite having already spent an estimated amount of over $100 million without having shown convincing economic prospects nor having secured a long-term exploitation authorisation ("not yet proved up sufficient gas for a 15-20 year project" [Chairman's letter, 21-Nov-2016]);

 

-     The Board still holds on to expensive execution capacity although Bowleven's most valuable asset is a 20% stake in Etinde for which Bowleven ceded the crucial operator role;

 

-     The Board intends to cover Bowleven's general and administrative expenses by acquiring cash generating assets instead of taking the path of cutting these expenses significantly.

 

We do not believe that the Board in its current composition is suited to undertake the necessary strategic review or subsequent required actions. We urge shareholders to appoint a revised and independent Board to formulate and execute a strategy that is in the best interest of all shareholders.

 

Proposed Board appointments

 

Strong, independent directors of sound reputation and experience have been identified in whom all shareholders can trust to undertake the strategic review and to provide the skills required for Bowleven's future:

 

Christopher John Ashworth (63)

Chris Ashworth was a partner at Ashurst for 20 years and headed the Corporate Department. He thereafter led O'Melveny & Myers' European M&A business and was a partner at Lovells. Most recently, he was General Counsel at Knight Vinke.

 

Eli Chahin (51)

Eli is a Senior Advisor to Alix Partners, one of the leading global corporate turnaround and restructuring firms, which he joined in 2010. He has over 25 years of experience in interim management, corporate finance, financial restructuring, turnaround consulting and crisis management across several countries. He has worked both as advisor and interim executive in a number of restructuring cases including for a listed Oil & Gas company which required performing project analysis and devising balance sheet strategies.

 

He currently serves on various boards, including Al Jaber Group, a privately owned conglomerate with over 56,000 employees and an industry leader in oil & gas pipelines construction work and oil rigs refurbishment, where he oversees the undergoing operational and financial restructuring as an Independent Director since December 2016. Prior positions include senior roles with ANZ Investment Bank and Standard Chartered Bank.

 

 

Chris and Eli would join David Clarkson on the Board of Directors.

 

If necessary, Eli would act as interim chief executive to implement Bowleven's new strategy.

 

 

 

Bowleven's 10-year track record as operating company 

1. Significant shareholder value destruction

-     Since appointment of Bowleven's CEO in 2006, share price has decreased by c90% despite investments of an estimated $650 million over the last 10 financial years;

-     Negative enterprise value with cash holdings exceeding market value at the end of 2016;

-     Estimated over $80 million spent on Bomono and administration over the last two financial years alone.

 

2. Board independence?

-     Four of seven directors are ex-Cairn Energy executives or advisors, including two of Bowleven's Non-Executive Directors;

-     Accountability and consequences for failures?

 

3. Corporate expenses

-     Administrative expenses of $20 million over the last two financial years despite ceding operator role of Etinde;

-     Over $8 million remuneration of directors while the Company incurred $219 million of pre-tax losses over the same period.

 

4. Consistent strategic direction? Execution and relationship management?

 

Etinde

 

-       CEO proclaimed transaction with Petrofac in 2012 to drill and develop Etinde as milestone to deliver first production. Yet, strategic alliance was terminated in July 2014 at a cost of $9 million to Bowleven;

-       CEO announced farm-out to NewAge and Lukoil in March 2014 with Bowleven giving up crucial operator role;

-       Public statements:

▪     10-Nov-15: "drilling anticipated during 2016";

▪     30-Mar-16: "drilling expected to commence in 2017";

▪     8-Nov-16: "eager to drill the two wells as soon as practicable";

▪     14-Dec-16: "Drilling to progress once stakeholder development alignment achieved".

 

Bomono

 

-       Estimated $45 million spent on drilling and testing of two onshore gas wells in the financial year 2016 (Bowleven's estimated budget for drilling excluding testing of net $13-15 million [RNS 27-Jun-14]);

-       Despite an estimated spending of more than $100 million, no long-term exploitation authorisation secured;

-       Farm-out efforts unsuccessful so far and negatively impacted by dispute with drilling contractor

 

A new value realising strategy is needed - NOW!

 



 

Appendix 2

 

Details of proposed directors as required by section 163 of the Companies Act 2006

 

 

Name:

Christopher John Ashworth

Former name(s):

N/A

Service address:

The company's registered office

Country or state of residency:

United Kingdom

Nationality:

British

Business occupation:

Lawyer

Date of birth:

5 May 1953

 

 

 

Name:

Eli Chahin

Former name(s):

N/A

Service address:

The company's registered office

Country or state of residency:

UAE

Nationality:

British

Business occupation:

Interim Executive/Chief Restructuring Officer

Date of birth:

15 December 1965

 


This information is provided by RNS
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