Karoon Gas boss Bob Hosking wants you to know that he is not going anywhere.
Hosking might have fought off an attack on the Karoon board this week, led by a disgruntled shareholder, which levelled claims of nepotism and poor corporate governance at him, but he’s not willing to forgive or forget.
“I’m utterly bewildered,” he says.
“We’ve got this success rate of in excess of 70 per cent in exploration – which is world class – yet I’m referred to as ‘Casino Bob’. I don’t get it.
“It’s about 200 to 300 per cent better than Woodside Petroleum’s [success rate].”
Activist shareholder Erwin Weinzinger circulated the Casino Bob nickname, accusing the boss of running the company with a “casino mentality”.
Weinzinger heads up Pegasus, which claims to represent about 3 per cent of Karoon’s register, and tried to install three new directors at Karoon’s annual general meeting in Melbourne on Monday.
The push failed, although the 64-year-old Hosking only avoided a “second strike” on the company’s remuneration report by the barest of margins. Frustration
But Hosking’s frustration remains palpable.
He has taken great umbrage at what he sees as generous coverage given to Weinzinger, a former Credit Suisse banker, and he is most unhappy with a series of shots taken at him in The Australian Financial Review’s Rear Window column as the board challenge unfolded.
Several of Mr Hosking’s family members hold key senior positions in Karoon, including his sons Scott and Tim, which Weinzinger tried to use as ammunition.
Hosking remains unrepentant about the family ties at Karoon, arguing that family-controlled public companies are common and respected in markets such as the United States.
“I’m not even game to mention their names any more because of [the claims] of nepotism,” he says. “They’ve been in since 2005, they’ve been part of the whole shooting match.”
Karoon’s share price is hovering around $3, from all-time highs of around $11 achieved in 2010 – laying fertile ground for the shareholder activists. The thrill of the chase
But while Hosking, a BRW Executive Rich Lister with a fortune of more than $30 million, could bow out now a wealthy man from the $800 million oil and gas play he co-founded a decade ago, the thrill of the chase is still too great. And the prize?
“I suppose it is the challenge of becoming an international oil and gas company,” he says.
“I’m not after public accolades. A lot of people don’t really know what we do.”
The right moment for stepping down, he says, could be after guiding Karoon into production – a goal that has proved elusive since Hosking and geologist Mark Smith founded Karoon in 2004 as a $6 million minnow through a backdoor float.
But seeing the company into production may not satisfy Hosking’s ambition for Karoon – it could extend to seeing Karoon rank among the global oil and gas heavyweights.
“Oil and gas companies – and Apple – are the biggest in the world,” he says.
“It allows you to dream a lot. In the right climate the game is very exciting.” Lack of recognition
Hosking feels Karoon has not got the recognition it deserves in the media for clocking 1400 per cent in investor shareholder returns, cumulatively, over the 10 years or so since it debuted on the local exchange.
He pulls out a recent AFR article on Oil Search, which highlights investor returns of nearly 600 per cent over 10 years – and notes that Karoon’s performance is twice that good.
“Yet that never gets a mention, does it,” he says.
For Hosking, the idea that Weinzinger would even countenance mounting a challenge and installing three directors is absurd.
Karoon’s stellar investor return track record over 10 years stood to be jeopardised by the interlopers, Hosking claims.
“We have got to make sure this 30 to 60 per cent annual return we’ve been able to achieve over 10 years is something we can keep up, and not have eroded by change,” he says.
He said if Weinzinger had got his way, and installed his trio of directors, it would have damaged the company.
“We need them [Pegasus] as a director? You’re kidding me. It could wreck the company.”
Hosking, who owns about 4 per cent of Karoon, says the support of big institutional shareholders, who do “extensive due diligence” on management and the company, is a vote of confidence.
But despite emerging a little bruised and battered from the Weinzinger attempt, Hosking is marching on. Sights on Brazil
Brazil is the company’s great hope, where it picked up a bunch of offshore leases as major companies were walking away. This week, Karoon will start drilling an appraisal well at its Kangaroo oil field in Brazil’s Santos Basin, in which it has a 65 per cent stake.
The hope is the Kangaroo is good enough to be the company’s “organic growth”, and underpin a huge gas exporting hub, catering to other undeveloped deposits in the vicinity held by some of the oil and gas majors.
Hosking sees Karoon as half a South American play (it also has Peruvian deposits) and half a West Australian play, where its other headline assets sit, including in the offshore Carnarvon Basin.
While production is the prize, Hosking is not prepared to do it at any cost.
He sold two of three lots of prime offshore acreage in Western Australia’s Browse Basin to Origin Energy this year for about $US800 million cash – equal to the market capitalisation of Karoon.
“The time factor was against us, as a small company. It [production] may not have been until 2021-22. It had already been seven years.”
Karoon is on the hunt for an independent chairman, after resolving to split Hosking’s role – he is executive chair and CEO. The new hire should be made by Christmas.
“Myself and [co-founder] Mark are not getting any younger,” he says.
“In the future, we are taking on more of a mentoring role, in terms of directing traffic.”
And as for looking back, Hosking says regret is futile.
“The greatest disease known to man is hindsight-itis, so let’s not go down that road,” he says.
“I think if you can get 70 per cent correct . . . All you can do is be honest with yourself, and try to correct it as you go forward.
“You can look back but you don’t want to stay back, you want to go forward.”
KAR Price at posting:
$2.95 Sentiment: Buy Disclosure: Held
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