Robbed of its past and its future by the ugly eccentricities of retail politics, Metgasco Limited stands a $128 million allegory of our fragile sovereign times.
Less than a year after running up the white flag on a 10-year investment in drilling for coal seam and conventional gas in NSW the little explorer that couldn't now finds itself embroiled in a dispute between a trimmed down independent board and its newest, biggest investor.
At issue is exactly what should be done with the relatively piddling $25 million bounty earned in last year's settlement that saw the company hand back a collection of exploration licences to the NSW state government.
To be clear, Metgasco spent a decade and $128 million on fulfilling the requirements of its exploration leases and hopes of its owners and the state government that it would translate gas discoveries into new industry.
That all changed in May 2014 when more than 1000 protesters besieged a dairy property at Bentley in northern NSW with the aim of preventing Metgasco from fulfilling its obligations to drill.
The protest was aimed at stopping unconventional drilling in the Northern Rivers district. But the well proposed was aimed at a conventional gas trap rather than coal seams and would not require the hydraulic fracturing that so many are so wrongly concerned about.
Instead of staring down this stupidity and reinforcing Metgasco's rights, the government buckled. Rather than send in 800 police to clear the driller's rightful way, the state's coal seam gas regulator withdrew approval to drill.
In the direct wake of advice from the state's chief scientist that the risks of unconventional gas were entirely manageable, the government then decided to reacquire a slate of exploration leases that covered coal seam gas country.
Long-term objectives
Metgasco sued the government and then decided to take the $25 million settlement offered. The coal seam experiment was done with and so was Bentley, which is a shame given that Metgasco reckoned it to be the biggest conventional gas trap ever identified in NSW and the Premier state is so woefully short of gas.
The lesson here is that the sovereignty that secures long-dated investment is just not something that should be overturned on a short-dated whim.
The original licence recovery program cost a financially buoyant NSW just a few million. But that cost escalated with a Metgasco settlement that appeared to reflect an intention to compensate the loss of tenure.
With that precedent now established, the state has started making a bit of a habit of back others whose investments have been rent worthless by government's disinclination to allow successful exploration to translate into production.
BHP Billiton is understood to have received compensation of more than $200 million for the state's recovery of the permit containing the Caroona coal project and discussions apparently continue between China Inc and NSW over the price of not being able to proceed with the Watermark thermal coal project.
Both projects contain world-class resources. But both sit close enough to the pastoral wealth of the Liverpool Plains. The politics of development are just too fraught for a jelly-backed government to contemplate.
It is less than a year since Metgasco formally surrendered its reason for being with reluctant shareholders accepting the government's bullying deal. Since then Metgasco has lost two chairmen, a chief executive and pretty much everyone that supported him and an office in the northern NSW centre of Casino along with all of the people employed to work in it.
'Interesting challenges' faced
Currently it is run by an executive chairman, Alexander Lang, who leads and independent board of three. Lang joined Metgasco in February, lured he says by the "interesting challenges".
"It is now a company without legacy but whose history has given it a broad shareholder base and some money in the bank and that is working in a market that is full of opportunities," Lang told me last week.
"Life has changed, for better or worse. We are looking at a broader range of opportunities than what Metgasco was doing two years ago. The shareholders still want us to be an oil and gas company. But we need to diversify our risk, we cannot again bank on only one opportunity."
The first of those opportunities is an odd one. Metgasco will lend $1.3 million to an ASX-listed explorer called Byron Energy so it can support its 45 per cent share of an quest for oil in the Gulf of Mexico. The deal leaves Metgasco looking like a investment cash box. It is not Lang's intention. He sees the company taking a more active role in future investments.
Last week Metgasco shareholders endorsed the extant board's proposal to give the owners $10 million of that compensation in the form of a capital return. But it was a Waterloo of a victory – a "damn near run thing". The board won the day with 54 per cent of the vote at a shareholders meeting.
One who voted against the board plan was Andrew Purcell. He is an engineer turned investment banker turned investment maker. Through his private investment company, Lawndale Group, Purcell has built a 19 per cent stake in Metgasco. Two weeks ago Purcell signalled an intention to force a board spill on the company. Purcell would introduce himself as chairman of Metgasco and bring a second nominee with him. Given Metgasco is presently overseen by a board three, Purcell would assert control from his position of minority power.
"They have had the best part of a year to get some deals done. They are just not going hard enough to get deals done in an environment where a lot if possible. There are a lot of desperate people out there," Purcell told me on Friday.
Purcell a resources kind of guy
The first thing Purcell wants Metgasco people to understand is that he is a petroleum and energy kind of guy. The second is that there is no intersection between his past personal and direct investments in the NSW unconventional space and any plans he might currently have for Metgasco.
"I am resources guy," Purcell told me on Friday. "Moving the goal posts makes it very difficult when you are in projects that take so long to develop and then plan," he said reflecting on Metgasco's plight. "It is nigh on impossible in the first place even without this sort of regulatory shit. But we live in a democracy, for all of its joys, and the politics cannot be ignored.
"So sure, the science is in, this [unconventional drilling] can be done properly, but we haven't got the community on side. Metgasco really was the lightning rod to a lot of community anxiety. In the end the fact that community protest was all over it a convention well targeting a conventional structure, well, that was an annoying detail by the time the protest hit the fan.
"This is a broader reflecting of what is going wrong in society, when science is being ignored in preference for fringe-dwelling bias."
Ahead of taking a potentially shaping position in Metgasco, Purcell had matched the company's intention by going long in the coal seam potential of the Northern Rivers.
Through Lawndale he bought several exploration permits as part of a deal with Dart Energy that also involved exploration assets in Asia. "NSW was not the starting point in that deal. I was really interested in Dart's Indonesian. But they wanted to sell the package."
This coincidence has some imagining that Purcell is set on recovering Metgasco's interest in an unconventional future in the north of NSW. Nothing could be further from the truth, Purcell said.
"The Northern Rivers dead and buried," he said noting that the only direct interest he retained in any NSW permit was one he shares equally with AJ Lucas, which he serves as a non-executive director. "We don't really know what the targets might be there. There are coal seams, but who knows. All we really know is that whatever molecules might be there are going to stay there for a long, long time."
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)