Providence shareholders push for boardroom shake-up

Shareholders at Providence Resources are pushing for an overhaul of the board in the wake of the company’s latest capital raise.

The oil and gas explorer headed by Tony O’Reilly jnr successfully raised $74 million (€66 million) in June to shore up its ailing balance sheet.

New and existing investors supported the funding drive on the understanding it would lead to a significant shake-up in the current board, which is perceived as being too close to the O’Reilly family.

Institutional Shareholder Services (ISS), a company that advises retail investors, last month recommended shareholders vote against the re-election of Philip Nolan as a non-executive director of the Providence board.

Mr Nolan's ties to the O'Reilly family stretch back to 2002 when he took over as chief executive of Eircom following its acquisition by Sir Anthony O'Reilly's Valentia consortium.

ISS also advised investors to abstain from re-electing current chairman James McCarthy. His father also has close ties to Sir Anthony O'Reilly having sat on the boards of a number of his companies.

Corporate governance

Another Providence director, Philip O’Quigley, was a finance director of the company less than five years ago, which according to the UK corporate governance code undermines his independence.

Fellow board member Lex Gamble, meanwhile, also has business ties to the O'Reillys and was appointed to the board more than 10 years ago.

In its advisory note, ISS claimed no one on the current Providence board could be classified as independent.

Both Mr Nolan and Mr McCarthy were ultimately re-elected at last month’s agm. However, according to sources, they were reinstalled on the back of pledges from the company that changes would be forthcoming.

Shareholders are also said to be unhappy at the low level of stock acquired by board members in the recent capital raise.

Falling shares

Since the rescue funding was announced, the company’s shares have shed 18 per cent of their value, falling from 12.5p to 10.6p in London.

The refinancing saw London-based M&G Investment Management take a 15 per cent stake in the firm. Disclosures also revealed that Capital Group has a 9.7 per cent stake, while UK investors Henderson Group and Hargreave Hale each hold 5.6 per cent stakes.

The company has used some of the proceeds to pay off $20 million of loans from US lender Melody Capital, with the balance covered by almost 10 million shares.

The money was also used to pay off what the company owed drilling services firm Transocean as a result of a long-running legal dispute relating to its Barryroe field.

Providence desparately needed funds to finance the business until a farm-out agreement for Barryroe can be agreed with a prospective investor.

A previous deal with London-based Sequa Petroleum fell through last year after the latter failed to raise the necessary funds.

Providence yesterday announced it had taken an increased stake in its Dunquin South prospect. The increased 26.8 per cent holding comes as a result of ExxonMobil's decision to exit. The basin lies in about 1,500m of water in the southern Porcupine Basin and is located about 170km off the Republic's southwest coast.