Cottee's sticking point

Cottee's sticking point
CENTRAL Petroleum managing director Richard Cottee says the groups of alternative shareholders seeking to replace the board and derail the $78 million Macquarie Group takeover offer should bank on him sticking with the company if the deal fails.
Haydn Black
01 June 2017 08:15 News

In a supplementary targets statement issued late yesterday designed to address shareholder's concerns about the Macquarie offer, Cottee said he had been contacted by a number of larger shareholders under the belief he would stay "in all circumstances".

That is not the case.

The scheme booklet specified that Cottee intends to resign from all roles at Central if the scheme resolution is not passed.

In a letter to shareholders, Cottee said if the Macquarie bid were to crash and burn he may remain with the company if he thought he could work with any new board but he would need to be convinced there was a viable strategy to ensure Central's survival on the table, and that did not seem likely.

And he warned that if the OptionCo's S249D notice was successful, and the rest of the board was ousted, he would go down with that ship and resign from all roles at Central.

He said he had been given no real insight into any competing visons for the company, and warned the various groups they had overlooked issues of alignment between the board and management.

Cottee added that board change would also create uncertainty in both gas and funding.

The company's supplementary scheme booklet was aimed at "correcting information in the market", and has resulted in the scheme meeting being delayed until June 19.

Central's board, including Cottee, continues to unanimously recommend Macquarie's 20 cent per share cash offer with a contingent value note, and says independent expert EY has reviewed the additional information and found it has not changed it opinion that the scheme is both fair and reasonable.

Cottee warned shareholders that they may not fully understand the depth of the existing links between Central and Macquarie: as a gas customer, significant debt holder, and joint venture partner.

Central owes $84 million to Macquarie, which comes with debt covenants that require Central to have sufficient cash reserves to meet the next quarterly loan payment, and Macquarie will also have a significant say on the develop of the pair's Mereenie oil and gas field, which requires significant investments, and is the best option for extra gas production to take advantage of the Northern Gas Pipeline.

It Macquarie elects to sole risk work Central would face dilution.

Central has also warned that Macquarie could potentially take all the revenue from Central's recent EDL gas sales contracts in 19 months under the terms of the original Mereenie funding agreement, which could serious impact Central's ability to generate revenue, particularly if no new contracts are entered into.

Central also has a potential bonus payment of $15 million due to Macquarie, and a possible free-carry for a $55-75 million Mereenie development program within five years, and it needs to sole risk a commitment well on the Ooraminna field by March 6 next year.

If it fails to drill or gain an extension it could lose the gas-prone permit.