Wednesday 19th October 2011
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Cue Energy’s largest shareholder, Todd Energy, is seeking shareholder approval to take the company’s board from three to seven directors, five of whom either have direct or close connections to Todd.
The plan is revealed in the notice for Cue’s annual meeting, in Melbourne on Nov. 24, along with a new long term incentive plan for key executives, who are challenged to get the share price from the current level of around 26 Australian cents a share to 53 Australian cents by June 2013.
The increase in directors also requires an expanded directors’ fee pool, which Cue directors are asking shareholders to increase $A700,000 a year, from A$400,000 at present.
The moves come as Cue prepares to tap what it hopes will be a huge new natural gas reservoir in the North-West Shelf, a highly prospective area offshore of West Australia, where it has partnered with US mid-cap operator Apache and believes it could find large enough reserves to create a Liquefied Natural Gas operation.
The four proposed directors include two Todd senior executives, its executive vice-president upstream energy and resources Paul Moore and Todd’s manager of upstream new ventures Tim Dibb.
Todd, which owns 23.5 percent of Cue and is New Zealand’s largest privately held oil company through Todd Petroleum, has also nominated as independent directors Andrew Young and Geoffrey King, both of whom have extensive oil industry experience. King is also a former director of Singapore Petroleum, which is Cue’s second largest shareholder, at 16.6 percent.
Cue’s chairman is the immediate past chief executive of Todd Petroleum, Richard Tweedie, who serves with two other directors, Leon Musa and Steven Koroknay, each of whom currently draws a A$100,000 fee.
The nominations are to “supplement the existing board to provide the skills and experience required to take Cue Energy into the future,” Todd’s group general counsel Chris Hall said in a letter to shareholders.
“Cue Energy aims to become a top end, mid cap entity and this vision is supported by Todd Energy. The nominees possess very substantial oil and gas sector experience, which will be invaluable and Cue seeks to achieve its full potential.”
Also to be put to shareholders at the meeting is a resolution creating a new “performance rights plan” for four senior Cue executives, chief executive Mark Paton, chief financial officer Andrew Know, exploration manager Terry White, and chief commercial officer Alex Parks.
The scheme will deliver fully paid ordinary shares at no cost to the foursome if, at any time between July 1 2012 and June 30 2013 the share price rises above 53 Australian cents for 30 or more consecutive trading days. The rights will lapse at June 30 2013 if the vesting hurdle isn’t met, but new long term performance plans will be established annually.
The share price has never traded above 40 Australian cents in the last four years.
Half the shares issued under the scheme may be sold, but the other half must be held for at least a year, with a total of 4 million shares at stake – 1.6 million potentially available for Paton, and 800,000 each available for Knox, White, and Parks.
In a presentation to an oil conference last month, Cue said it was pursuing a five year vision to achieve market capitalisation of A$1 billion-plus, compared with A$180.7 million at a share price of 26 Australian cents, and to be between fifth and 10th largest exploration and production companies listed on the ASX. The company is also listed on the NZX and last traded at 35 NZ cents.
In calendar 2011, the company expects to produce around 2,500 barrels of oil and gas per day equivalent, rising sharply from 2014 if other major prospects are successful, to be as high as 6,500 barrels equivalent in 2015/16.
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