InterOil’s founder Phil Mulacek is critical of corporate governance at the company.
Phil Mulacek, the larger-than-life founder and ex-CEO of InterOil, has sought to reassert his influence on the aspiring Papua New Guinea LNG player by requesting shareholders vote on proposals to reduce the board and give shareholders the potential to veto deals.
Mr Mulacek, who exited as chief executive in late 2013, and Singapore-based Gerard Jacquin, representing about 7.5 per cent of InterOil stock, have put forward several measures they say would improve corporate governance at the US-listed company and would also give shareholders the power to veto corporate deals.
InterOil, a $US1.5 billion explorer headed by former Woodside Petroleum senior executive Mike Hession, is often cited as a potential target for Woodside or other cashed-up petroleum players looking to get a foothold in gas-rich PNG. Its Elk and Antelope gas fields are thought to be the largest gas discoveries in Asia for 20 years or more and are set to under pin the Papua LNG project involving French major Total and ASX-listed Oil Search.
InterOil sold a 40 per cent stake in Elk-Antelope to Total, while Oil Search also entered the venture by buying out minority interests. Total is still liable for further payments for its stake, depending on the size of gas reserves in the fields. Independent certification of the resource is under way.
But in a filing lodged early Wednesday Australian time, Mr Mulacek and Mr Jacquin point to “recent material transactions” they say “have been non-accretive for shareholder value” at InterOil.
They say the ten-strong board is “too large and expensive” for a company with no operations and that reducing it would make better use of resources. They also wants at least half of directors’ total compensation to be in the form of equity, and want restrictions around share sales by directors. Total cash compensation for directors should be limited to $US600,000 a year.
Over the past two years, InterOil’s board and senior management has been overhauled, with former BG Group chief executive Chris Finlayson appointed as chairman in August 2014. A number of other directors and senior managers have also been named in what Mr Hession portrayed as a needed revamp in line with a move from an explorer to a producer.
But InterOil’s LNG project has been slowed by the weak market and slow progress in proving up reserves, while the share price has fallen by two-thirds since late 2013. The company has also passed the role of operator of Elk-Antelope to Total, leading to job losses last year, while the board remained unchanged.
Bernstein Research said last November that InterOil needed “to focus on costs…which are coming in above our estimates”.
The proposals put forward by Mr Mulacek and Mr Jacquin would also see restrictions around payment for executives at InterOil in a transaction that resulted in a change of control.
The intention is “to ensure that board and senior executive compensation incentivizes the Board and management to seek transactions that are accretive for shareholder value,” according to the filing.
Other proposals would seek to ensure that at least a third of directors have “direct skills, competency and experience” that is relevant to the exploration and development of InterOil’s oil and gas resources in PNG, and to improve disclosure and verification of announcements on reserves and discoveries.
The pair want any transaction or asset sale valued at more than 10 per cent of the company’s total asset value to require shareholder approval.
InterOil has advised of an annual shareholder meeting on June 14, but Mr Mulacek and Mr Jacquin said in the filing they had not received any response to their requisition, made on March 21.
InterOil said the board is reviewing the proposals.