Update for Block Energy shareholders
On 13 August 2021, the Board of Block Energy plc (the “Company”) issued a notice of requisition of General Meeting to shareholders. This included a statement by the Board regarding its position on the requirement for a forensic investigation into actions of the Company, primarily focusing on the excessive potential cost of that investigation.
On 17 August 2021, a statement was published by a group of concerned shareholders (the “Concerned Shareholders”), representing approximately 20% of the shares in the Company in which they offered to fund the entire cost of the exercise, negating any impact on the Company’s balance sheet.
The Company responded to this on 25 August 2021 via RNS. Unfortunately, many of the assertions made by the Company are exaggerations and distortions of the Concerned Shareholders intentions and the circumstances around the requisition. The Concerned Shareholders believe these are designed to prejudice the process and avoid further scrutiny of the Company. In response, the Concerned Shareholders make the following points:
- The Concerned Shareholders consider that the Board has consistently focused on inflating the costs of a forensic investigation and the impact on the Company and management time. Their argument that the investigation would detract from the Company’s ability to run effective operations and deliver a successful result on the drilling of the WR-B1 well is designed to scaremonger and does not reflect operational reality. The Concerned Shareholders do not consider there is any link between a proposed investigation intended to give shareholders comfort on the Board’s corporate governance activities and the operational drilling of a well. This assertion is effectively to threaten shareholders not to investigate the activities of the Board if they want the Company to continue its drilling activities. The Concerned Shareholders consider that this has the effect of manipulating the vote at the upcoming General Meeting.
- As a result, the voting at the general meeting may now be irreparably impacted by the Company’s actions which the Concerned Shareholders consider have been designed to avoid further investigation into the Company’s affairs.
- The Company asserts that “Had GP Jersey genuinely wished to revise the Resolution it could have followed due process and withdrawn the Requisition Notice”. The Board wrote to the Concerned Shareholders on 9 August 2021 to state that they considered the requisition “vexatious” because, in their view, nothing had changed since the first requisition to remove the Chairman. The Concerned Shareholders responded on 10 August 2021 (prior to the issue of the notice of General Meeting) to (a) point out that having two of the non-executive directors resign and the remaining third state that he supported that resolution – a complete breakdown in corporate governance was obviously a change and (b) offer to engage with the Board to address their concerns with the scope and cost of the forensic investigation. Had the Company engaged with the Concerned Shareholders as requested (and as it had undertaken to do in the Company’s previous RNSs), a compromise could have been reached which may have led to the requisition being withdrawn. In keeping with its historic approach, the Company delayed and did not engage until after it had posted the general meeting notice. To blame the Concerned Shareholders is disingenuous. This situation has arisen because of the Board’s conduct.
- The Company states: “GP Jersey’s overall approach shows that the Shareholder Group has a disregard for the Company’s and Shareholders’ funds and effective use of management time”. Why would Concerned Shareholders offer to meet the costs of the investigation if they had such disregard? Indeed, so material are the Concerned Shareholders views and concerns around the issues raised, that they have incurred professional fees many times greater than those which the Company has alleged it has incurred. This is because the Concerned Shareholders believe so strongly that an investigation is required to understand the Company’s historic underperformance and corporate governance failings.
- Given the current situation with (a) the Board’s claims that it needs to focus on the drilling of the ongoing well and (b) the ongoing manipulation of shareholders’ votes through claims of exaggerated costs (despite the offer from Concerned Shareholders to fund the investigation), the Concerned Shareholders will be abstaining from the upcoming vote. Furthermore, they are willing for the requisition or proposed resolutions to be withdrawn and to engage with the Company to do so.
- However, shareholders should note that, to date, the Company has still not provided an any adequate or plausible explanation of the underlying questions raised by the Concerned Shareholders on matters such as directors’ dealings and transparency and accuracy of market disclosures.
- In its statement on 25 August 2021, the Company says: “the Company’s Nominated Adviser guides and advises the Company on its responsibilities to ensure compliance with the AIM regulatory regime and, each year, BDO LLP (the fifth-ranked UK audit firm) audits the Company’s accounts”. This is misdirection on the part of the Board. To be clear, neither of these parties performs a role or function which can forensically investigate and address the issues raised by the Concerned Shareholders.
- The Concerned Shareholders refute the Company’s position that the resignation of the two Independent Non-Executive Directors has anything to do with “their wish to avoid involvement in the continuing tensions between the Company and the Shareholder Group”. We consider that this is a distortion of the true circumstances around the resignations and the reference to “much missed colleagues” is completely at odds with the circumstances surrounding these resignations and is misleading. In fact, the Concerned Shareholders regard their resignation as clear indication of the complete breakdown of corporate governance. If the Board is confident of its statement in the RNS, we request that the full circumstances surrounding their respective departures, including all relevant board minutes, meeting notes and resignation correspondence be shared with all shareholders.
- The Concerned Shareholders do not regard the appointment of Mr Jeremy Asher as independent. This was a hastily organised appointment to backfill the void left by truly independent Directors. Replacing “two well-regarded Directors” with a long-term associate and friend of a Chairman whose competence is under fire and who avoids answering questions about the Company’s operational performance is a blatant disregard of corporate governance standards.
- The Company’s statements around its operational performance are entirely unacceptable and do not reflect operational norms of its peers. Two of the three wells to date have failed to meet their objectives. A 33% operational performance outcome is bottom quartile and the Board’s statements demonstrate a complete disregard for shareholders invested capital.
The Concerned Shareholders are entirely aligned with all shareholders in the Company. They have funded the Company’s activities with an investment of c.£4 million, unlike the Board and Management who have extracted c.£2.5 million from the business in the same timeframe. The Concerned Shareholders have no other agenda than to see the Company’s performance improve and see any recovery in the share price. To consistently misrepresent the intentions of the Concerned Shareholders has no other object than to frighten other shareholders into voting against an impartial review of the Company’s performance (which is every shareholder’s right to request). Ultimately the Concerned Shareholders plus all other shareholders own c.97% of this business – unlike the Board who own c.3% – almost all of which was awarded at historically low share prices.
Again, the Concerned Shareholders believe that the interests of all shareholders are served by full disclosure and transparency – we, again, invite the Company to agree to put all correspondence between the various parties, including that specifically marked privileged and confidential by the Company’s lawyers, in the public domain. We expect the Company will again refuse requests to provide further information. This is consistent with past practice.
For this Board to suggest that its interests are aligned with all shareholders in seeking to avoid an investigation into its own failings is telling.
To conclude, the Concerned Shareholders still consider that a review of the Company’s operational performance and corporate governance failures is essential (and in the Company’s best interests, even if Concerned Shareholders have to personally fund it) to demonstrate a clean bill of health and move forward positively with the support of all shareholders. The Concerned Shareholders will continue to seek to engage with the Board on an investigation once it has concluded its drilling of the WR-B1 well.
While the Concerned Shareholders look forward to a positive result of the WR-B1 well, this investigation will be even more crucial should the well not be successful and before more shareholders money is wasted.
Notwithstanding the result of the forthcoming general meeting, the Concerned Shareholders will continue to hold the Board to account for the good of all shareholders and following the completion of the well will continue to call for an investigation into the Company’s corporate governance and operational practices.