As previously advised, there is a General Meeting of shareholders of Metgasco Ltd (Metgasco) being held on Wednesday, 11 April 2018 at 10:00am (Meeting). You should have received a Notice of Meeting dated 8 March 2018 regarding the Meeting. A copy of that Notice of Meeting can be accessed from Metgasco’s website using the following link.
Letter from Mr Purcell to shareholders
On 3 April 2018, the Board of Metgasco received from Andrew Purcell, on behalf of his investment company, M&A Advisory Pty Ltd (M&A Advisory), a letter he sent to some, though not all, Metgasco shareholders regarding the proposed resolutions being put to the Meeting (Letter), a copy of which is attached. In the Letter, Mr Purcell argues against his own removal (resolution one) and advocates that shareholders should support his tenure on the Board. He further argues in favour of the motions being put by M&A Advisory to remove three members of the Board (resolutions two to four).
The proper mechanism for Mr Purcell to put his case to shareholders is by way of a written statement circulated by the Company pursuant to section 203D(5) of the Corporations Act 2001 (Cth). The Company considers that Mr Purcell has not acted in accordance with his director duties by circumventing the procedure that he was required to follow and sending the Letter directly to some shareholders only. The Company has made a complaint to ASIC in relation to this and other conduct by Mr Purcell.
Company’s response to Purcell Letter
The Board of Metgasco rejects the substance of all matters raised in the Letter from Mr Purcell, however the Board will address a number of statements in his Letter to enable shareholders to make an informed decision with regards to the future of Metgasco.
1) Independence of Dr Robbert Willink
Dr Willink joined the Board of Metgasco upon initiative by me as the Chairman of Metgasco in a desire to bring relevant independent industry expertise to the Board of Metgasco, following the departure of Mr Terry White. He has remained independent of the resolutions being put at the General Meeting. Dr Willink has asked that the following note be provided to shareholders on his behalf by the Company for the purposes of clarification regarding his position:
“Any perception that shareholders may have after reading Mr Purcell’s Letter that I have allied with him in any capacity or otherwise support his views is NOT founded in fact.”
2) Mr Purcell’s response to the Board’s concerns
Mr Purcell has failed to address any of the concerns previously raised by the Board. While his Letter states that the Notice of Meeting includes "a number of misleading statements", he fails to address any of those. The Board remains concerned that Mr Purcell is not willing or able to answer legitimate questions by the Board regarding his alleged behaviour or potential associations with other shareholders
3) Mr Purcell’s associations and interests
Mr Purcell says his "associations and interests have always been declared openly". As set out in the Notice of Meeting, in December 2017, the Board wrote to Mr Purcell with ten direct questions enquiring about potential associations with other shareholders, including a shareholder who had in the past been a declared associate of Mr Purcell. Mr Purcell refused to respond to any of those questions in the affirmative or negative. Declaring interests "openly" would have involved a response.
Mr Purcell states that M&A Advisory's interest will always be 'perfectly aligned' with all other shareholders’ interests on the basis that it holds a 19.2% interest in the Company. In the view of the Recommending Directors, Mr Purcell's conduct suggests that a substantial shareholding alone does not guarantee that the substantial shareholder will always act in the best interest of all shareholders.
From the very first meeting I had with Mr Purcell, within days of receiving his substantial shareholder’s notice in August 2016, Mr Purcell made it very clear that he expected to be given effective control of Metgasco and to be appointed into the most senior management position of the business.
As mentioned in the Notice of Meeting, Mr Purcell has sought personal benefits from potential company transactions which would not have been available to other shareholders and which would not have been in the best interests of other shareholders.
Shareholders may find it instructive to read the Takeovers Panels Reasons for Decision in relation to circumstances surrounding Mr Purcell’s sudden departure from board of Cougar Energy (renamed Moreton Resources) in November 2013: Click here
In that context, shareholders should also note that one of the companies mentioned in the Takeovers Panel’s reasons, Twinkle Woods Limited, has had at least one common director and shareholder with Twinkle Capital Pty Ltd (Twinkle Capital). Twinkle Capital is one of the companies that were subject to the questions regarding potential associations that Mr Purcell has refused to answer since December 2017.
4) Alleged lack of response to a concern raised by Mr Purcell
Mr Purcell raises his concerns regarding “possible related party transactions”. He is correct in stating that he did raise these with me as the Chairman. However, Mr Purcell fails to mention that I followed up on his concerns and, after conducting an investigation relating to the alleged conflicted party, I then responded with my finding that there was no undisclosed conflict and that the transaction in question was indeed not a related party transaction.
5) Concerns regarding undue influence by other shareholders
Mr Purcell makes extensive mention of two other shareholders of Metgasco, Keybridge Capital Limited (Keybridge) and Aurora Funds Management Limited (Aurora), and certain persons involved in those companies and what their dealings and intentions may be with other businesses.
It is not for me to comment here on matters of Keybridge's or Aurora's other businesses, but with regards to Mr John Patton and his behaviour on the Board of Metgasco, I personally have to say that I have found John's actions, involvement and behaviour in line with the expectations I would have of a director of a listed company. He has contributed to open and transparent board discussions and has asked appropriate and diligent questions regarding the business. While he has made his views and on occasion the views of the shareholder who nominated him to the board known to the board, he has never demanded that those views be accepted or followed. In all critical decisions the board made he has followed the recommendations of the independent directors.
I strongly reject any suggestion that Keybridge, Aurora or any other shareholder has undue influence over the Board. I have been a very strong advocate for an independent Board with a majority of independent directors that makes every decision in the interests of all shareholders without ever favouring the interests of only one or a small group of shareholders.
It is indeed the substantive independence of the majority of the Board and, in particular, my fierce independence as the Chairman that has drawn Mr Purcell's ire.
6) Expertise and Performance as Director
Mr Purcell claims that his experience and tenure in the Oil & Gas industry means that the Company and its shareholders would be better off with him in charge. Tenure alone does not equate to valuable expertise or success.
In that that context, shareholders should be aware that Mr Purcell has been a director of Melbana Energy Limited (previously known as MEO Australia) since August 2015 and was appointed Chairman of Melbana in November 2015. Since Mr Purcell was appointed Chairman of Melbana, the shareholders have suffered a negative total shareholder return of around 30%.
A review of Mr. Purcell’s other ASX board tenures (which can be identified namely, Moreton Resources Limited, Realm Resources Limited and AJ Lucas Group Limited) provides little further confidence. Indeed, across all four identified board tenures of Mr. Purcell, Melbana appears to be the best case, with total shareholder returns during tenure at those other firms appearing to be even worse.
Since being appointed Chairman of Metgasco in February 2016, Metgasco has enjoyed a positive total shareholder return of greater than +60% (on a distributions reinvested basis). A large part of our current success comes on the back of an excellent business opportunity with Byron Energy Limited which the Board initiated and has since been extending.
Shareholders should note that Mr Purcell on various occasions opposed these very transactions with Byron Energy.
I urge you as a shareholder of Metgasco to carefully consider who you want to trust with the management of your company. By voting in line with the Board’s recommendations, i.e. voting FOR resolution one and AGAINST resolutions two, three and four, I believe you will ensure that the company will be overseen by a majority independent board which will continue our path of sustainable growth for Metgasco.
Shareholders should consider voting online at www.registrydirect.com.au if they have not already done so, or call Metgasco on (02) 9923 9100 if they have any questions about the voting process.
Alexander Lang, Executive Chairman
Phone: +61 02 9923 9100