KEY POINTS:
New Zealand Oil & Gas said yesterday the independent directors of its Pike River Coal subsidiary last week resigned en masse because the explorer had decided to take control of the impending float of the coal miner.
However, the explanation of the departures of independent chairman Dennis Wood, and independent directors James Ogden and Graeme Duncan, comes amid persistent talk the resignations followed a dispute over the level of funding shareholders were extending to the mine.
The oil and gas explorer's shares have suffered amid the confusion over Pike and details on Monday that a well drilled in the Tieke-1 oil prospect - in which NZOG has a 12.5 per cent stake - was largely dry. The shares last night closed down 3c at 94c and are now 6c below the slated issue price of an upcoming $23 million NZOG cash call.
NZX asked NZOG last Friday for more detail on the departures of the directors because it was not satisfied with the explorer's explanation they had resigned for personal reasons.
Talk of the boardroom split at Pike emerged on Wednesday. NZOG - which has a 61 per cent stake in the coal mine, representing more than half the explorer's assets - disclosed the resignations on Friday morning.
"No explanation for the resignations have been provided to the market other than the directors resigned for personal reasons," the NZX said.
"Could you please confirm the date on which the directors resigned [and] ... provide further information on the reasons for the resignations of the directors."
In response NZOG told the NZX: "The company understands the main factors ... were NZOG's decision to directly assume responsibility for finalising and structuring the Pike River Coal float and also, in the meantime, to deal with the Pike development as an NZOG project."
NZOG said it had acted within the NZX's requirements that it keep investors informed. It said the resignations were not formalised until Thursday evening, while the details of the resignations were only noted in response to the Business Herald's reports on the boardroom split.
However, well-placed sources suggest the departures followed a disagreement over the funding of Pike.
One suggestion is that Pike's balance sheet has been stretched by the decision to postpone the float, originally slated for Christmas, until February. This was said to have been precipitated by NZOG's decision to push ahead with its current capital raising. NZOG's $17.5 million private placement and an upcoming issue to raise another $23 million would have conflicted with Pike's $60 million to $65 million fund raising.
A Pike spokesman declined to comment on the suggestion that the independent directors disagreed with NZOG and other shareholders' funding of the Pike project. He referred the Herald to the NZX statement.
Despite the questions, Pike project observers say the mine is still expected to proceed. NZOG has plenty of cash on its balance sheet. Moreover, share options attached to the impending issue still give NZOG investors an incentive to exercise their rights and take up the $23 million issue.
Observers say these financial resources combined with those of Pike's cornerstone shareholders, India's Gujarat NRE Coke and Saurashtra Fuels, should see the project through any eventuality.
However, doubts about the success of the float remain.
Observers say the departure of three directors so close to the planned IPO raises questions and suggest the company may struggle to find the necessary independent directors required by stock exchange rules for the float to proceed.
"The resignation of independent directors is not a good sign, particularly en masse," said Brook Asset Management chairman Simon Botherway. "It is most unlikely in the current environment they will get three independent directors in such a short space of time."
A Pike River spokesman said the board was confident it would find the necessary directors.
