23rd Dec 2022 14:46
(Alliance News) - SP Angel's Energy Analyst David Mirzai on Friday said shareholder activism will be a recurring theme in the exploration and production sector.
Mirzai's prediction comes after AIM-listed Hurricane Energy PLC's largest shareholder, activist investor Crystal Amber Fund Ltd, had indicated its desire to monetise its shareholding. It requisitioned a general meeting to remove six directors of Hurricane Energy, including the executives and chair, and appoint two of its own.
As of November 11, Crystal Amber has a 29% stake in Hurricane Energy, a Surrey-based oil and gas producer in fields offshore west of Shetland.
Crystal aims to remove Hurricane's Chief Executive Officer Antony Maris, Chief Financial Officer Richard Chaffe, and Non-Executive Chair Philip Wolfe, as well as its own nominees Juan Morera, David Craik, John Wright, the latter two Crystal Amber managed to appoint in June 2021.
Crystal Amber wants to appoint Tony Buckingham and Franco Castelli as directors. They are former executives of Albion Energy Ltd. Buckingham was chief executive officer of Albion, Castelli was managing director.
This follows an ongoing attempt started in November by Hurricane to be taken over via a formal sales process, which the company on Friday said is progressing well. It said it requested all participants to submit their requests by January 7.
Last week Monday, Hurricane said it intended to return capital of up to USD70 million to shareholders in the first quarter of 2023, which it said it plans to vote on at a general meeting on January 11. Crystal Amber fund on Friday said the capital return would require approval by the High Court of Justice in England & Wales.
Hurricane in early November said: "Further distributions totalling up to USD110 million could be made during 2023 and 2024 in aggregate, with a final distribution of up to USD30 million in 2025, following the cessation of production from the Lancaster operations." The company ceased productions at Lancaster in September.
David Mirzai, energy analyst at SP Angel, said: "This year has seen the exploration & production sector move towards consolidation and shareholder capital returns as companies look to squeeze costs and return excess cash to investors in the absence of wider merger & acquisition."
Hurricane Energy shares closed up 2.6% at 7.81 pence each on Friday in London, while Crystal Amber Fund shares closed 0.3% higher at 97.75p each. Since January 4, Hurricane shares more than doubled from 3.83p, while Crystal Amber shares fell 14% from 114.00p.
Hurricane Energy on Friday noted the requisitioned meeting by Crystal, recommending its shareholders to take no action until further communication.
Hurricane's Chair Philip Wolfe, among those Crystal Amber seeks to remove, said: "Given the excellent traction we are seeing in the FSP, which the company commenced to explore all options for shareholders and to fulfil Crystal Amber's goals, the decision to issue the requisition notice at this point is simply mystifying. We note that Crystal Amber is open to bids resulting from the FSP. We encourage the participants in the FSP to submit bids in accordance with the process and look forward to updating shareholders in due course."
SP Angel's Mirzai added: "The newly expanded energy profits levy should also encourage UK-based firms to combine to maximise tax efficiencies and capital allocation. However, at the same time we have seen an increase in shareholder activism across the E&P sector, as different stakeholders supported competing strategies to realise the value of their holdings. We expect these competing themes to amplify in 2023."
By Tom Budszus, Alliance News reporter
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