My concerns. So here we all are many years after the change of...

My concerns.

So here we all are many years after the change of board in 2012 and our share price has fallen from 50 cents (post consolidation) down to 20 cents a 60% loss.

I acknowledge without question that Mr Cottee and team have done an excellent job in turning the company around since 2012 and focusing on gas and costs reductions and elevating CTP to a position where it now has income producing assets that have converted the company into a cash flow positive position. Well done!.

However what I have great difficulty comprehending is;

• Why were we told in late 2016 at shareholders meeting that we were in a unique position to take advantage of the looming gas shortage.

• Why were we told that Mr Cotttee was waiting for any GSA to be negotiated and signed till later in 2017 when prices would be even higher.

• Why are we now being told in the half yearly report dated 8 March 2017 at page 2

“The East Coast Gas Market continues to tighten with energy security becoming a mainstream issue. We are now seeing both government and supplier responses to the issue such that Central no longer needs loud amongst the few voices calling for necessary change.

Consequently, the Company now expects the market imbalance to last for 5 to 7 years before returning to historical trends.

Markets always balance over time and the real question remains to what extent the rebalancing is caused by permanent demand destruction versus increase in supply.

Two points should be noted as a result of this belief, namely it is imperative: (My emphasis)

1. To have the capital to develop the maximum reserves in time for sales in the second half of next year;

and

1. Any delay in proving up reserves that cause the sales to be contracted after 2021 may be at historical trend price rather than that obtaining during the shortfall.”

I infer these comments to mean that substantial amounts would need to have be spent to enable CTP to “develop the maximum reserves” by 1 July 2018.

I note that nowhere does the board mention what $$ amounts would be required to “develop the maximum reserves” and or by what dates such amounts would be required..

We simply do not know, all we are being told at page 2 of the

ANNOUNCEMENT AND MEDIA RELEASE – CENTRAL PETROLEUM LIMITED

“Given Central’s debt levels, the substantial at risk capital that needs to be invested before certified reserves can be increased would have required shareholders to either contribute most of these funds or suffer a very material dilution.” (My emphasis)

Again I infer that the primary motivating force to accept the Mac Bank offer was;

that any delay by CTP in proving up reserves would delay CTP being
able to cause the sales to be contracted after 2021

Therefore because of that financial and access to gas sales imperative, the shareholders have been sacrificed for the benefit of Mac Bank et al.

To allow MacBank to develop the maximum reserves in time for sales in the second half of next year;

Upon questioning by me at a shareholders presentation in Sydney in late 2016, Mr Cottee said that he had several strategies in place to make any take over very difficult for any offerror.

I fail to comprehend why these strategies appear not to have been utilised, rather than what appears to be a massive capitulation by the board?

In other words it appears to me that the Board is saying by implication

“Ship!! we have a monumental opportunity here and we are better off cutting the shareholders loose so we can take advantage of this once in a lifetime opportunity”

The only conclusion I can come to is that, rather than approach the shareholders and tell them the urgency and how much would be required and what for and seek approval for a cap raise or a Share placement, the board has taken a position that clearly benefits MacBank to the detriment of CTP shareholders due to the stated position of the board, namely that it is “it is imperative”.

1. To have the capital to develop the maximum reserves in time for sales in the second half of next year;”

This position is further supported by the comments in the media release from the Board dated 10 March 2017 at page 2 where it says

“Central’s ability to fully realise the opportunity presented by the east coast
gas market shortage will substantially depend on future appraisal and
exploration discoveries, since a majority of Central’s existing certified Proven
(1P) gas reserves are dedicated to current gas sale agreements. Given Central’s
debt levels, the substantial at risk capital that needs to be invested before
certified reserves can be increased would have required shareholders to either
contribute most of these funds or suffer a very material dilution.”

At the meeting I also specifically asked Mr Cottee if he would be doing a cap raising, his response was,

No, Not unless I really have too, and even then it would only be because it was absolutely necessary”

So I ask myself, why is it now an “imperative” to ensure that sufficient capital is available via Macbank which will destroy shareholder wealth, BUT is not of such an “imperative” on behalf of shareholders by seeking a cap raising or agreeing to a significant dilution allowing CTP to take part in the fruits of it’s victory.

The answer is axiomatic, shareholders are expendable. !!!

I must say this situation leaves a very nasty taste in my mouth and I am sure a lot of others.

Observations.

I observe that the purported scheme of arrangement, makes provision for certain payouts. I list below the items;

(Central Share Rights and Central Future Share Rights):

(i) prior to the date of the Scheme Meeting, Central and each holder of Central Share Rights and / or Central Future Share Rights have entered into binding and irrevocable agreements, in a form and on terms acceptable to BidCo (in its absolute discretion), for such Central Share Rights and / or Central Future Share Rights to be:

• cancelled and extinguished, in consideration for a cash payment equal to the cash portion of the Scheme Consideration (being $0.20 per Central Share Right and $0.20 per Central Future Share Right);

or
(B) exercised and the Shares underlying those Central ShareRights or Central Future Share Rights (as relevant) are issued and allotted,

Now, I stand to be corrected, but I read that as saying in simple terms that any employee options held by the employees (including the board and Mr Cottee) will be redeemed and paid out to that person to the value of 20 each option.

I note that someone inside CTP has the following options. (Obtained from Form 3 dated 9 March 2017)

30,494,002 Options $0.45 15/11/17

30,000,000 Options $0.20 01/09/19

Simple maths disclose that at least 60 mill options may have to be paid out at the rate of 20 cents per option, I calculate that this is in excess of $12 million.

I seem to recall that Mr Cottee and his service company hold significant number of
options.

So someone may well walk away with a significant amount of money as compensation for relinquishing options that are so far out of the money that at least the “30,494,002 Options $0.45 expiring on 15/11/17 will on current information be worthless.

But notwithstanding that, someone will possibly be paid the exercise price of 20 cents, for achieving a deal that has no prospects of getting to the exercise price.

Remarkable ABSOLUTLY REMARKABLE. !!!

My position.

I am disgusted with the situation !

How to potentially defeat Mac Bank.

I urge existing shareholders to do the following

• Sign up to the CPSA (Central Petroleum Shareholders Association) to show support

• Get your rellies and friends to buy a minimum $500 amount of shares in CTP.

• When the forms come through for each shareholder, make sure that they are signed and voted appropriately and sent off to (Not CPSA) as it is safer for each shareholders to send it back to CTP rather than having all located in one depository, where a stray dog may eat them.

Should the board resign?

It has always been my understanding that when a company (Ship) is in trouble that the captain alerts the passengers as to the danger and stays on the bridge until the ship goes down.

To see the board leaving the ship on well protected lifeboats while the passengers cling to the rails of the ship as it sails on certainly creates a lack of confidence in the current board.

Yes, I think the board should resign. But I won’t hold my breath.

Whether the current board stays or goes sooner rather than later, is in my opinion a secondary issue, One step at a time, the IMPORTANT ISSUE is to stop MacBank from having the Scheme of Arrangement approved.

That can only occur at a special resolution if one or other of the two requirements are not satisfied.

• The vote fails to achieve 50% + 1 vote ( i.e. simple majority) of the motion.

• The vote fails to achieve 75% of the votes cast in favour of the motion.

In my opinion, there is a reasonable chance of the voting block achieving sufficient support to block the vote.

HOWEVER for an abundance of caution. it is easier and less work to achieve this by increasing the votes by asking friends and rellies to buy a marketable parcel in CTP and voting accordingly.

Good luck to all and I will be attending the CPSA meeting on Tuesday to make appropriate comments

Regards
Camdenbob [email protected]