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New World Oil & Gas; shareholders on the cusp of a major victory!

By Ben Turney | Tuesday 27 October 2015


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


New World Oil & Gas (NEW) has finally announced the date of the AGM. This marks the culmination of months of hard work behind the scenes, ensuring an orderly transition for the company from being one of AIM’s most despised stocks to one with an extremely bright future. As expected, Adam Reynolds is on the ticket for election to the board, but in a surprise twist he is joined by Nick Lee of Paternoster Resources (PRS). Lee will have the full support of NWOGaction, so his appointment is almost a foregone conclusion. Fred Hodder is retiring and Peter Sztyk now deservedly faces the wrath of his shareholders. This is all fantastic news.

Sentiment towards New World has been abysmal. After years of failure and excessive boardroom greed, few in the market believed that an orderly transition at New World would be possible. The summer’s forward selling controversy hardly helped matters and the general consensus has been that New World’s directors would cling on come what may or, even worse, adopt a scorched earth policy.

However, this view failed to take into account a few critical points.

First, the position of New World’s board was hopeless. As soon as the directors decided not to participate in July’s placement and open offer, they sealed their fate. Having stripped themselves of their last vestiges of shareholder support, there is simply no way this group could have claimed a legitimate mandate to engage in any significant capital spending. Had the directors pursued a rushed drill in Belize, they simply would have opened themselves up to personal liability. The looming threat of the shareholder action group all but guaranteed that any spending of New World’s cash pile against the express wishes of shareholders would have resulted in legal claims against board members personally. 

The second point the market missed was the action group’s public silence.  Although we kept our members as fully updated as we could, word didn’t leak. Everyone involved in this deserves congratulations for holding the line so well. It goes to show what is possible if people work together, with the right intentions. 

Earlier in the summer the action group was forced to run a publicly aggressive campaign. This time, such an approach would have been extremely counter-productive. With the certainty that an AGM was coming and safe in the knowledge that members of the company could nominate as many directors for election to the board as they wished, the board’s fate has always been a foregone conclusion. The key priority has therefore been to preserve as much of the company’s cash pile as possible. Had the action group pursued an EGM, this would have inevitably resulted in New World racking up legal fees, which would have been in no one’s interests other than the lawyers.

Instead the group has been far more pragmatic and better organised. This has meant that New World’s share price has suffered in the short term, but in the medium to long run this sacrifice puts New World in a much stronger position.

Reynolds’ and Lee’s election to the board on 17 November will be a transformational event for New World. Once the company is cleaned up it will have so much going for it. Apart from the strength of the new team and its cash pile, New World also attracts an incredible amount of retail attention for such a small stock. Sentiment towards the company has been crushed after all that has happened, but once this turns the shares could fly. Based on their track records of introducing cracking deals to cash shells, the Reynolds/Lee combination has the potential to be incredibly potent. Shareholders now need to throw their support behind these two men and if all goes to plan we could all see fireworks in 2016.


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Comments

7 comments


  1. drunken sailor

    Ben,

    Good news and well done. There is a time for outspoken activism and a time for behind the scenes activism.

    SER shows how perceived cash piles can be denuded even without expensive drilling campaigns. If less cash is there than you think should be when the new board finally take control, they may need to spend some of what is left on forensic accountants and then legal proceedings to get it back. Hopefully the cash pile is still there.

    Even, so in the early stages, the cash will not get NEW all that far and NEW will still be on the subscale boarderline. It would therefore send a very good message if the new NEW board were to announce a remuneration policy which preserved the cash pile in the short term, but gave plenty of upside to directors who deliver real value from which all shareholders can benefit. 3 Legs resources announced a policy which could be emulated. The former bank robber also announced and even better policy when he arrived at SER, but reneged on it when he cut and ran as his former bank robbing past caught up with him. As I am sure the new NEW board will have no former bank robbers on it, it should not be a problem for them to show it is possible to be on the board of an AIM listed company and not rip off shareholders, whilst delivering sweet FA, but to temper short term greed in return for handsome and just rewards in the longer term.

    A bit of cash on a new name, logo and ticker may also be a wise investment.

  2. I am in for one of Toms “council house punts” I mill shares . These two if elected may turn it into a substantial “falling over water” fund . Lovely Jubbly . Sell that rancid shite CEB ……… oh sorry you cant ;-) (snigger like Dick Darstedly’s dog Mutley ) and buy these .

    I like council houses ……….they are well built and the layout is usually good inside . My own house used to be a council house several owners back . Built in 48 just after the war ………… all brick with a cavity ……… none of this foam block shite with recycled swan vesta matchsticks for roof trusses . I must be a moron then , apart from I own it and my normal market size is not £500 but £1-2000 initial entry and watch . Tom is a closet bricks and morter snob I think ;-)

  3. @Drunken Sailor – The board gave an update on the cash position not long ago and has also publicly committed to preserving it, pending resolution of the company’s strategy. Inevitably some will have flowed out of the company, but not as much as some people fear.

    @wildrides – now I need a translation. Don’t think you meant to post that here :-)

  4. Well done Ben – I’m in for a few million shares today as Mcap at £3.7million is pretty much cash plus value of an AIM shell. If BrokerMan Dan, next to no money and no prospects can push Sefton up to a Mcap of £10million then I’m hoping the hype of Adam Reynolds and £3million cash can push this above £5million for a 50% gain and then we’ll see what he brings.

    Not exactly value investing but hey who cares!


  5. DUCK AND DIVE

    Well done, Ben. I hope it turns out well for you; but I’ve seen too many incompetent directors slope off into the night with their pockets bulging. Have you factored in their contractual entitlements once ousted? Could they yet come up with a wheeze to award themselves a golden goodbye? You have been warned.

  6. Oh yeah …………… forgot to say “well done Ben” . The boy done good …………. very good indeed . In this case you must have saved investors an awful lot of money . I know you must have put an awful lot of hours work into it . Deffo a major flip with no flop in sight . Well done again ……….. praise when its due .

  7. @Steve, Duck and Dive & Wildrides – thank you. We haven’t won yet, but this is a positive step forward. Wrt golden goodbyes, it’s something I am acutely aware of.


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