20th Aug 2015 12:52
LONDON (Alliance News) - The long-running battle between oil and gas company Petroceltic International PLC and activist shareholder Worldview Capital Management heated up once more on Thursday after Worldview published an open letter asking the company to answer allegations of "fraud and corruption" in its Algerian operations, which Petroceltic later in the day said were "baseless, untrue and defamatory".
Petroceltic shares were down 9.3% to 49.00 pence per share on Thursday afternoon.
Worldview Capital Management has a 29% stake in the oil company and the pair have been exchanging words since May 2014. Worldview has previously raised concerns over the management at the company and its finances, culminating in an unsuccessful attempt to oust the company's chief executive.
On Thursday, Worldview released an open letter to Petroceltic which centred on "public allegations" that Project Director Geoff Stevenson, who is in charge of the company's Ain Tsila gas field development in Algeria, and members of his family "may have allegedly been beneficiaries of a scheme designed to defraud the company primarily by hiring contractors via a company called Petroplan, allegedly using overstated invoices for contractor services and that Petroceltic allegedly may have awarded contracts, such as the Front End Engineering Design contract, on a questionable basis".
"We write to seek clarification for shareholders in respect of certain allegations which have recently appeared in the public domain relating to alleged fraud and corruption which may have taken place in the management of Petroceltic's Algerian project," the letter said.
Worldview also said the allegations contend that Stevenson is no longer the project director.
"If correct, these public allegations suggest that shareholder value may have been compromised by the overpayment for services and/or funds being fraudulently diverted away from Petroceltic and thus its shareholders," said Worldview.
Worldview has submitted a list of questions to Petroceltic to try and gather some clarity over the situation, including what the company has done to investigate the allegations, if Stevenson is still in charge of the project, whether Petroceltic is aware of any "wrongdoing" and what the rationale was for using Petroplan for the project.
"As the largest shareholder in Petroceltic, and following our sustained and constant efforts over the last 14 months to proactively engage with the board to improve Petroceltic's governance, we are disappointed to again raise issues that, if substantiated, further evidence a culture of inappropriate and failed governance," said Worldview.
Petroceltic reacted to Worldview's letter later on Thursday, saying the allegations were based on reports published by an anonymous blogger. It said that on the basis of the investigation it has conducted so far, it "considers the allegations to be entirely baseless, untrue and defamatory."
The company said it has started action in Irish courts to ascertain the identity of the blogger who made the allegations initially and said that, once identified, the person will be "invited to demonstrate any bona fide evidence to support the allegations made."
Should no evidence be forthcoming, the company said it will take appropriate legal action "in order to protect the good name and reputation of Petroceltic, its staff and consultants."
The open letter and allegations come ahead of an extraordinary general meeting due to be held on September 7 for shareholders to vote on a separate issue raised by Worldview, which wants shareholders to vote in favour of its proposals to restrict future asset disposals, something Petroceltic has disagreed with.
Worldview has tabled a resolution that proposes Petroceltic should seek approval from shareholders for any material asset disposals which represent 25% or more of the company's revenues, profits, or oil and gas reserves after claiming Petroceltic had "run out of money".
Petroceltic is currently proposing placing the Ain Tsila gas field as security for a bond issue, which has also ruffled Worldview's feathers. Worldview has called the proposed bond deal "perilous to shareholders".
Petroceltic has said Worldview is proposing the resolution and fighting its bond plans as part of an "ongoing strategy" to gain control over the board. It argues that the company is already subject to rules on the disposal of assets, and the proposed resolution is contrary to the applicable standards set out in these rules.
By Joshua Warner; [email protected]; @JoshAlliance and Sam Unsted; [email protected]; @SamUAtAlliance
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