WEST of Shetland oil pioneer Hurricane Energy is facing an attempted boardroom coup after a dissident investor launched a scathing attack on the company.
Hurricane plans to complete a debt-for-equity swap that will see creditors take control of the firm and existing shareholders left with just five per cent of the company.
However, Crystal Amber Fund has called for the chairman of Hurricane, Steve McTiernan, and all four non-executive directors to be removed from office with immediate effect.
Crystal Amber Fund has a near 15 per cent interest in Hurricane and has invested more than £25 million in the business. The value of its holding has plunged in recent months.
Hurricane stoked huge excitement about the potential of the West of Shetland area by making a series of finds off the isles. It was valued at £1.2 billion after starting production from the flagship Lancaster oil find in June 2019.
READ MORE: Giant West of Shetland field start up welcomed by Shetland oil pioneer
However, shares in the firm slumped after production from Lancaster lagged expectations and Hurricane slashed estimates of the size of the field and other finds.
After announcing its restructuring plans in April, the company saw its capitalisation fell to less than £20 million.
The company’s directors have said Hurricane has no realistic alternative but to complete the proposed debt for equity swap. The company has $230m(£160m) bonds due for repayment in July next year.
However Crystal Amber Fund said the Hurricane board was acting prematurely as the company was generating enough cash to cover the interest payments due.
It claimed: “Consistent with the Hurricane board’s disdain towards its shareholders … Hurricane released details of a proposed financial restructuring whereby the Fund believes that Hurricane will be put into an extended wind down and shareholders’ interests in Hurricane will be wiped out almost completely in favour of the Bondholders.”
READ MORE: Scottish Gas owner slashes valuation of West of Shetland acreage
Crystal Amber Fund also criticised Hurricane directors for proposing to complete the restructuring without putting the plan to a shareholder vote.
It has called on Hurricane to requisition a general meeting at which shareholders would be able to vote on its proposal to have Mr McTiernan, David Jenkins, John van der Welle, Sandy Shaw and Beverley Smith removed.
The fund has proposed that industry veterans John Wright and David Craik be appointed non-executive directors.
Regarding Hurricane’s chief executive Antony Maris and chief financial officer Richard Chaffe, it said: “Whilst the Fund lacks confidence in the executive directors, it believes that their technical and financial knowledge of the current situation means they should continue in office for the time being.”
Hurricane said yesterday that it was considering the content of the Requisition Notice and would make a further announcement in due course.
READ MORE: Plans for billion barrel oil field development off Shetland set to be revived
Hurricane expects the restructuring plan to be put to a vote at a meeting of bondholders on June 4. The plan would involve bondholders exchanging $50m of the total due to them for shares in Hurricane, leaving $180m borrowings outstanding. If bondholders approve the plan it would then need to be sanctioned by the High Court at a hearing scheduled for June 11.
When it announced the proposed restructuring, Hurricane said that after assessing options for Lancaster it had become apparent that in all reasonable circumstances the company was unlikely to be in a position to repay its bond when it matured.
Last week directors reiterated the claim that in the event of the restructuring not being approved by bondholders or winning court sanction it was likely that there would be a controlled wind-down of the group’s operations followed by an insolvent liquidation of the company.
Hurricane Energy shares closed up 0.57p, at 1.3p. They sold for 60p in 2019.
The company was founded by geologist Robert Trice to focus on an under-explored layer of granite. He resigned as chief executive in June last year.
READ MORE: Shell underlines value of North Sea business after cutting Aberdeen jobs
Shareholders that control at least five per cent of the voting shares in a firm can require it to hold a general meeting. The company concerned must notify shareholders within 21 days of receiving such a request that there is to be a meeting. The meeting must be held within 28 days of the company sending out the notification.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here