Wednesday, 2 October 2013

Metgasco shareholders are revolting

Northern Rivers communities having contact with Metgasco Limited have come to understand that this coal seam gas exploration and company mining is not a good corporate citizen and, that it is often a stranger to the truth in its dealings with both local residents and media.

It has been a long time coming but finally larger shareholders are noticing what smaller shareholders appear to have known for some time - that the Metgasco board is all talk and no walk.

The Letter to Shareholders* mentioned in Metgasco Limited's advice to the Australian Stock Exchange:

27 September 2013
The Shareholders Metgasco Limited
Dear Fellow Shareholders
Over the past months a number of significant shareholders in Metgasco Ltd (the “Company” or “Metgasco”) have expressed their disappointment in the performance of our Company to the CEO and Board of Metgasco. This group of shareholders includes the founders of the Company, shareholders who have supported the Company since listing in December 2004, shareholders located in the Northern Rivers region and proposed local gas customers of Metgasco.
Over the past two and a half years two highly dilutive capital raisings have been undertaken and almost 200 million new shares have been issued. These capital raisings at historically low prices have diluted shareholders of the company by over 50%. No tangible progress has been made by the Company with the proceeds from these capital raisings despite over $27 million being spent by the Company in this period. Most recently (25 July 2013) the Board of the Company decided to reward this performance by the issue of over 10 million shares to employees at a price 20% below the current trading price of the shares.
This group of shareholders has supported the Company through difficult circumstances. However, activist opposition and government dithering does not excuse the Company’s total lack of direction, high spending levels, inadequate planning and an inability to communicate with shareholders.
This group of fellow shareholders is very concerned that there is no strategy for the Company going forward evidenced by the confused letter sent to shareholders by the Company dated 9 September 2013.
Today these shareholders have given notice to the Company of resolutions that they propose to move at the next general meeting of Metgasco and have requested that a meeting be convened by Metgasco to consider these resolutions.
The Proposing Shareholders have nominated three directors to the Board of Metgasco with the intention of ensuring that the strategy of the Company is re-directed towards improving the performance of Metgasco so as to enhance its share price. The interests of the Proposing Shareholders are wholly aligned with other shareholders of the Company which is to ensure that Metgasco achieves its full potential. We do not represent the interests of any other corporate third party.
At the forthcoming general meeting the Proposing Shareholders intend to vote in the following manner.
• The Proposing Shareholders will not support the re-election of Mr Nicholas Heath.
• The Proposing Shareholders will not support the election of Mr Greg Short.
• The Proposing Shareholders will not support the Remuneration Report.
• The Proposing Shareholders will not support the award of shares for the performance of Mr Peter Henderson in his role as Managing Director.
The Proposing Shareholders seek the election to the Board of the following:
• Ms Glenda McLoughlin
• Mr Michael O’Brien
• Mr Stuart Glenn
Summary biographies of these nominees are attached.
Metgasco needs to be focussed and determined at the Board level. The Proposing Shareholders expect that a refreshed Board will ensure enhanced financial discipline and re-focus the efforts of the Company on its core strengths.
We urge you to support this initiative to revitalise the Board of Metgasco.
Yours faithfully
John Vaughan
On behalf of the Proposing Shareholder Group

Metgasco Limited 2013 Annual Report here.

*Northern Rivers residents may recall Byron Bay residents Mr. Vaughan as a letter to the editor writer and online commenter in defence of Metgasco and the coal seam gas industry.


In an obvious effort to stem the shareholder revolt and butress its weak share price, Metgasco Limited issued this media release on 2 October 2013:


2 October 2013

Metgasco (ASX: MEL) today advises the following:

Metgasco Limited (ASX: MEL) is pleased to announce today that it is initiating plans to recommence gas exploration. The company plans to drill the Rosella-1 conventional gas well in its exploration permit PEL 16 located in the Northern Rivers region of NSW.

Commenting on developments, Metgasco’s Managing Director, Peter Henderson, said that today’s announcement reflects positive regulatory and political developments.

“Six months ago, Metgasco suspended field operations when the NSW government announced major changes to regulatory and administrative procedures. Like Metgasco, major industry players also chose to suspend activity in NSW at that time. However, recent regulatory and political developments, particularly since the September Federal election, have encouraged Metgasco to initiate the activities necessary to enable field operations to recommence”, added Mr Henderson.

Metgasco participated in the successful NSW Energy Security Summit on 26 September 2013, at which the serious gas shortages facing NSW consumers over the coming years were given extensive media coverage. Major energy users, farming community representatives and other stakeholders joined gas explorers and producers in reviewing the very disturbing forecasts of steep gas price increases in all eastern states.

There was strong acknowledgement at the summit by key stakeholders that price increases and potential gas shortages could only be mitigated by additional supplies of gas. In particular, the NSW Resources and Energy Minister, the Hon Chris Hartcher MP, expressed support for NSW gas explorers to pursue new gas supply sources to help moderate the inevitable gas price increases faced by NSW gas consumers. He also made clear to stakeholders that the NSW government’s tight environmental requirements were to remain.

In order to successfully complete exploration drilling, Metgasco will be working with the regulators and conducting a community consultation program to ensure that environmental concerns are addressed and the environmental objectives of the NSW government’s regulatory regime are satisfied, and the community is aware of the Company’s operations.
Following the recent Federal election, the new Federal Industry Minister, the Hon Ian Macfarlane MP, has initiated processes to facilitate dialogue between gas explorers and farming groups in order to bring about a resumption of gas exploration and development in NSW. This work is greatly valued. Mr Macfarlane is supportive of the gas industry and is working to harmonise and simplify regulations across state and federal boundaries. Metgasco strongly supports the need for smart regulation based on sound science.

For over 10 years Metgasco has operated successfully in the Northern Rivers region and has enjoyed the strong support of the majority of landholders and community members with whom the Company works. Over this period, 300 landholder agreements have been put in place, and over 50 wells drilled. Polls conducted by the Richmond Valley Council also show community support for the natural gas industry.

The Rosella-1 exploration well is to be drilled to a proposed total depth of 2,100m on a site 12 km to the northeast of Casino. The well is a commercially high risk well that will test the non-CSG, conventional gas potential of the Greater Mackellar structure. The prospect is interpreted to cover an area of 260 km² and hold a potential mean volume of 1,304 BCF of gas in place, comprising an estimated 456 BCF in the Ripley Road sandstone and 848 BCF in the Gatton sandstone. The primary objective is the Ripley Road sandstone which was tested in Kingfisher-1 at an initial rate of 3MMcf/d. The well will also test the thick sequence of gas bearing strata in the Gatton sandstone which had low permeability in Kingfisher-1, together with the deeper Basal Bundamba Sandstone (a lateral equivalent to the Laytons Range Conglomerate), Ipswich and Nymboida Coal Measures which were below the total depth reached in Kingfisher-1.
If successful in encountering gas, it is likely the well will be tested to assess gas production potential. Metgasco does not currently plan to conduct hydraulic fracturing of the well. However, in the event that it is later determined that hydraulic fracturing has the potential to increase the economic potential of the well, provision will be made for later well re-entry and fracture stimulation. This would be similar to the Kingfisher-1 discovery well where a limited 3m interval was fractured to stimulate gas flow in 2010.

The Company is committing to carry out the preparatory work over the coming months. A final commitment to drill the well is to be made when a suitable drilling rig has been identified, regulatory permits are in hand, and discussions with key stakeholders have taken place. There must also be a continuing expectation that the regulatory and political environment will continue to improve, providing stability and support. With confidence restored, the support of key stakeholders and the timely receipt of approvals, it is anticipated that the well will be drilled in the first half of 2014, depending on rig availability.

About Metgasco

The Natural Gas Company - Metgasco Limited
Our business is about finding, producing, marketing and delivering gas from natural gas reserves.  We are a natural gas company that is focused on developing the coal seam gas and conventionally trapped gas resources of the New South Wales Clarence Moreton basin. 
We have established a large natural gas reserve base and are in the process of converting our gas reserves into gas supplies delivered to customers.  Metgasco has grown its reserve base at a very low cost relative to other companies.  Our finding cost per gigajoule of 2P reserves is amongst the lowest in Australia.  This provides the basis for shareholder value creation in the future.
Michele Perry
Metgasco Limited Direct: +61 2 9923 9124

1 comment:

Anonymous said...

Odds on the real winner in all this will be ERM if it uses the board spill as an excuse to install one of its own as a director of Megasco.