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New World Oil & Gas: Peter Sztyk claims shareholders are behind him. So call the AGM.

By Ben Turney | Thursday 17 September 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.

There is still an opportunity to settle the future of New World Oil & Gas (NEW) like gentlemen. That is unless current Chief Executive Peter Sztyk gets his way. Having just lost an hour of my life to the company’s futile shareholder call, it is quite clear that Sztyk is the only man in the room who cannot see the game is up. To his credit he fielded some of the more difficult questions he was sent, though ducked the most challenging ones. Despite this, his answers were highly unsatisfactory. Sztyk claims he has a mandate from his shareholders to pursue the company’s interests in Belize. That is complete balderdash, as he knows full well.

During the call Sztyk suddenly declared his personal intention to spud a third exploration well in Belize before 15 October, when the current licence runs out. The only explanation for this action, if it ever comes to pass, is that it is some form of vengeful scorched earth tactic designed to punish the company’s shareholders.

Hopefully more sensible heads will prevail on New World’s board, which recognise that taking such a step, before the pending shareholder vote, will cause significant collateral damage to all involved. And that is not to mention the risks of personal liability the directors would assume if they jointly pursue an unjustifiable course, directly contrary to their shareholders’ wishes.

Sztyk might hope such a threat will save his job. It won’t. As he admitted in the call, he will be up for re-election at the AGM. It is inconceivable he will survive. His fate is sealed and the best he can hope to achieve is to leave with some dignity intact. The pent up anger and frustration felt by New World’s shareholders remains a powerful force and just because we’ve had two months of public rapprochement does not mean the desire for justice has diminished.

If Sztyk truly believes he has a mandate from his shareholders then he will call the AGM today and hold it in 14 days time.

But of course he does not believe this. How could he?

As Sztyk veered off into an alternate plane of reality, he tried to persuade listeners to the call that the 14.94% participation in July’s controversial and mispriced Placing and Open Offer gives him a mandate to spend the company’s funds. That 85.06% of his shareholders (including all of the board!!!) resoundingly rejected the plan is a mere inconvenience.

Sztyk’s wild and desperate claim of a mandate is almost too absurd for words. Proper analysis of the reasons 14.94% of New World’s shareholders participated in the Placing and Open Offer will almost certainly reveal they did so simply to average down. As for the 85.06% of shares that were taken up by “new” investors, those that held the naked short positions must have acquired the overwhelming majority of these. There is no doubt about this.

Sztyk can prance round in his NEW Emperor’s Clothes as much as he likes. It’s sadly a pretty unedifying spectacle for the rest of us to watch.

NWOGaction will write to the board shortly to express its opposition to any spending commitments being made prior to the AGM. Perhaps other shareholders will too. I wonder how many shareholders will write to Sztyk in support of his folly?

Separately Sztyk preposterously claimed that the summer’s naked short position had no bearing on the company’s structuring of the Placing and Open Offer. He can deny reality until he is blue in the face, but what Sztyk cannot escape are the following statements made by the board in the accompanying circular:

  • “Given the uncertainty as to the full extent of the settlement problems in the Ordinary Shares and the Company's desire to raise a meaningful amount of money to advance its plans, the Board has resolved to make the Open Offer as large as it can without the need for publishing a prospectus, which the Board consider would be impractical in the circumstances.”
  • “If the Placing and Open Offer does not succeed in addressing the settlement issues in the Ordinary Shares, the Company and Cornhill Capital have agreed (subject to compliance with all relevant laws and regulations and to the Directors' fiduciary duties) to take such reasonable steps as they may agree, acting in good faith, to be required in order to deal with such settlement issues.”
  • “Such steps may, as a last resort, include an issue of new Ordinary Shares for non-cash consideration utilising a cash box placing (which would neither require the consent of Shareholders nor be on a pre-emptive basis) conducted through Cornhill Capital in accordance with the Articles of Association.“
  • “If the Company and Cornhill Capital are unable to identify or agree on such steps, the Board may be faced with no alternative but to commence winding-up of the Company.”

This is black and white. The Placing and Open Offer was inextricably linked to the settlement issues experienced in New World’s stock. Those “settlement issues” represented the naked short position, so to claim the two were not related and the company was not interested in trading in its stock on the open market is outrageous.

That Sztyk doesn’t seem to be aware of AIM Rule 36 Settlement, which requires AIM companies must have appropriate settlement arrangements in place, is not a surprise either.

At this point, what happens next is down to New World’s board. Peter Sztyk is in a tough spot, is clearly angry (judging by how he chose to end the call) and appears ready to inflict a final unforgiveable punishment on his shareholders. But he cannot act alone. The only sensible and honourable course of action left open to New World’s directors now is to call the AGM as quickly as possible. The board has now presented its plan. Let shareholders decide on whether or not to endorse it.

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  1. Fucng disgraceful behaviour by the BOD. “I’m getting kicked off the gravy train, and im taking you unappreciative shareholders with me.”

  2. Ben,

    The indication they were going to drill a well is clearly indicated in their RNS of the 1st September 2015.

    They are an exploration company afterall, so investors in same should expect them to drill a well, surely?

    No management just hands over the keys to someone else, and IF they strike oil they would of course be justified in their decision.

    You surely didn’t expect them not to defend their position without a fight?

    If you get the company,I suspect the treasury will be somewhat depleted, and you will have to work to make it a success, it won’t be handed over. I suspect you realise that now.

    By threatening them with your group, you have put them in a cannot lose situation, so they are going for it, and you probably would in the same circumstances.

    The losers of course will be the shareholders, as always.

    Quite why people persist in investing in AIM listed companies is beyond me. All the rules are stacked against shareholders, and management get fat salaries.

  3. @Alan – You misread the situation when you say they have nothing to lose.

    The company has previously declared it will pursue a well in Belize if it can secure a partner to co-finance it. While we can’t rule that outcome out entirely, they have a very short period of time to achieve this, in an horrific macro environment.

    Perhaps someone will put the money up, but if the company proceeds with the well on its own, with its limited available finance, ongoing severe weakness in the oil market and the high level of shareholder resistance to this, it would be grossly negligent for the company to proceed on its own.

    I wonder how many of the directors would be prepared to take this personal risk?

  4. How some people are declared fit to run a listed company is beyond me.

    The jokers need to get the order of the boot and never return to AIM.

    Tom – how you keep reporting on these things I have no idea, it must be like sweeping snow!

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