Explosive AGM raises serious concerns at Carnarvon

CARNARVON Petroleum, which holds a 20% interest in one of the biggest oil discoveries in the country’s history, held its annual general meeting today, which turned into a fiery affair.
Explosive AGM raises serious concerns at Carnarvon Explosive AGM raises serious concerns at Carnarvon Explosive AGM raises serious concerns at Carnarvon Explosive AGM raises serious concerns at Carnarvon Explosive AGM raises serious concerns at Carnarvon

Paul Hunt

Senior Journalist: Oil & Gas, Policy.

Paul Hunt

Independent and retail shareholders voiced serious concerns during the meeting regarding board transparency, management's "extortionate" remuneration, the appointment of Debra Bakker to the company's board, and a variety of more trivial matters. 

Six resolutions were put to shareholders. The first was the election of Debra Bakker as a director. 

This move was vehemently opposed by the biggest independent shareholder, former governor of Western Australia Malcolm McCusker through his entity McCusker Holdings. 

McCuster holds 4.39% of the company, or roughly 68.6 million shares, and teamed up with the second largest independent shareholder Nero Resources which owns about 2.2% of Carnarvon, and others, to nominate Doug Jendry as a board member. 

Jendry failed to secure a board seat at the AGM with less than 35% of shareholders voting in favour of his appointment, Bakker did after securing 66.44% of the vote. 

The Carnarvon board unanimously supported Bakker and said she was selected to join the company because of her previous banking experience following a "rigorous" search. 

Bakker addressed shareholders and cited her career as an investment and resources banker and that she would add diversity to the board as a woman, a farmer, and a variety of roles in board positions in the social services sector. 

However, Nero Resource Fund' CEO Russell Delroy asked whether Bakker was an appropriate fit given a coup led by his fund at Capricorn Metals last year. 

Bakker was removed as chairperson of Capricorn Metals along with the entire board in March 2019.

When the writing was on the wall that shareholders would look to replace the Capricorn board, Bakker controversially appointed a managing director to Capricorn on an annual $450,000 salary with a break-fee of about $100,000 just a matter of weeks before she was dumped by shareholders, Nero told fellow shareholders. 

"I was aware Nero Resources was obviously not going to support my appointment," Bakker said at the AGM as tensions flared. 

"I have absolutely no idea why [Nero would not support my appointment], other than that I guess one of my strengths and weaknesses is my bluntness and ability not to be pushed around." 

Bakker refused to address her past at Capricorn when pushed by shareholders. 

Shareholders then asked whether the Carnarvon board had considered not supporting her. 

Eventually the board said they had considered not supporting her after the two largest independent shareholders voiced concerns. However chair Peter Leonhardt admitted that the company had put those concerns aside for reasons that are not clear. 

"We were satisfied by the enquiries [into Bakker] that we made," Leonhardt said. None on the current board have worked with Bakker before. 

The second resolution put to shareholders was the re-election of Peter Moore as a director. He was voted in for another term though 22% of shareholders voted against his election. 

It was the third resolution - regarding management remuneration - that struck a sore spot for a variety of shareholders, not just the top two shareholders. 

Over the last two years the board has been given around $6 million in remuneration, according to Nero Resource Fund. A spokesperson for Carnarvon however disputed this saying it was just $3 million. 

Chairman Leonhardt admitted remuneration would be a "sensitive issue" amid the current oil price slump and COVID-19 recession. 

Nero Resources and McCusker accused management of looking to outsource operations to contractors and current remuneration levels were not warranted. 

This was denied by management at the AGM, but then later was revealed that if the company's Buffalo development were to go ahead would involve a "significant increment" that could potentially require outsourcing. 

The Buffalo project is a secondary project wholly-owned by Carnarvon in the Bonaparte Basin. It actually lies in the Timor Leste waters of the Timor Sea, outside Australian jurisdiction. Carnarvon is still searching for a farminee for the legacy BHP oil field. 

Shareholders also raised concerns that board tenure was an issue, and that outgoing chair Leonhardt had spent nearly two decades in the role. The incoming chair, William Foster, has already spent a decade on the board. 

"This does not strike me as a renewal process," one shareholder said. 

Leonhardt responded by drawing a correlation between himself, and his replacement, to Gerry Harvey and Kerry Stokes. Both Harvey and Stokes have held director positions for decades. 

A Nero Resources representative, stifling laughter, then pointed out that both Gerry Harvey and Kerry Stokes owned significant shares in their respective businesses, unlike the levels of the current board. 

A fourth resolution, the adoption of a performance rights plan, drew controversy because it was not transparent enough, according to shareholders. The performance rights plan did not detail vesting conditions or key performance indicators. 

"It is simply unhelpful. I'm really quite surprised the Australian Securities Exchange published it if I'm honest,"  one shareholder, Neil Ferris, said.

It was however passed, with just 64% of the vote, despite being quite vague. 

Generally speaking, the majority of Carnarvon's previous AGMs have seen resolutions adopted with as much as 90% support. However many votes passed with less than 70% of support from shareholders at this AGM. 

During the AGM some shareholders felt they were not being listened to by management and said there was a lack of accessibility. 

Carnarvon Petroleum is a joint venture partner alongside operator Santos (80%) in the Dorado oil project offshore Western Australia in the North West Shelf. Dorado was the biggest oil discovery in Australia in three decades.

The oil project, unlike Australia's second wave of LNG backfil projects, has not seen sanction pushed back thanks to COVID or the oil price. 

Carnarvon shares were up 3.77% at 27.5 cents by close. The company had a market cap of $414.82 million.  

UPDATED: 

This story has been edited to include a Carnarvon spokesperson's rebuttle regarding the level of remuneration the board received. The company's two major shareholders wrote to the Board with concerns that they were paid a total of $6 million in remuneration at the start of this month. The company spokesperson said this is incorrect and they were paid half that amount.