Lansdowne Oil & Gas Plc Corporate Governance

 

Introduction

 

The Directors of Lansdowne Oil & Gas Plc have formally taken the decision to adopt the Quoted Companies Alliance Corporate Governance Code (QCA Code) as its point of reference for Corporate Governance.

The QCA Code makes it clear that it is the prime responsibility of the Chairman to ensure the Company applies the QCA Code to the best advantage of all stakeholders.

Lansdowne Oil & Gas plc is an established upstream oil and gas exploration company with a clear business model and growth strategy. At this stage of its development, Lansdowne is focused on exploration and appraisal activities in the North Celtic Sea Basin, off the south coast of Ireland, but expects its assets to move forward through development to production. The Company has targeted the Irish offshore shelf areas close to existing operating infrastructure for exploration, as these provide shallow water (generally less than 100 metres), and relatively low drilling costs and the Directors believe that these factors, combined with favourable fiscal terms, have the potential to deliver high value reserves and consequential shareholder value. Our objective is to add shareholder value by finding, appraising, developing and producing oil and gas deposits in our area of focus.

We apply sensible corporate governance practices commensurate with our size and current level of non-operated activities, which we believe achieve our objectives.

How we seek to comply with the QCA Code is largely based on the corporate governance procedures we currently enact in practice and we have highlighted those areas where we intend to introduce additional measures to bring our corporate governance procedures more in line with that set out in the QCA Code. The Board of Directors are committed to maintaining high standards of corporate governance.

The Company is required to highlight any areas where we are not currently in compliance and to provide our reasons why not.

The first area of current non-compliance relates to the evaluation of Board Performance. Given the Company’s activities and its current Board composition the Company does not currently have a formal Board evaluation process.

The Company plans to address this by engaging the services of external facilitators on future Board evaluations, with the initial evaluation process to take place before 31 December 2018.

The second area of current non-compliance is that I, as independent non-executive Chairman, participate in a share based incentive arrangement. While participating in such a scheme is against the provisions of the Code it is not uncommon for companies with shares quoted on AIM to engage in such practices. My participation in the share based incentive scheme is considered to be at no cost to the Company and my holding is considered by the Board not to impact my position as independent non-executive Chairman.

The QCA Code is constructed around ten broad principles and a set of disclosures. The Board of Directors and I have considered how we apply each principle to the extent that the Board judges

these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each.

We believe that the result of our efforts to date provide stakeholders with access to the information they need to make informed decisions and the confidence that the Board hold corporate governance compliance in the highest regard.

Viscount Timothy Torrington Independent Non-Executive Chairman

Principle 1 – Establish a strategy and business model which promote long term value for shareholders

 

Lansdowne is an upstream oil and gas company, focused on exploration and appraisal activities in the North Celtic Sea Basin, off the south coast of Ireland. The Company has targeted the Irish offshore shelf areas close to existing operating infrastructure for exploration, as these provide shallow water (generally less than 100 metres), relatively low drilling costs and the Directors believe that these factors, combined with favourable fiscal terms, have the potential to deliver high value oil and gas reserves and consequential shareholder value.

The Company’s vision, over the longer term, is to create shareholder value through the development and monetisation of its oil and gas discoveries within the North Celtic Sea Basin.

The Company will continue to prioritise moving forward its appraisal/pre-development assets, in particular the Barryroe oil field, to field development and monetisation.

Since the downturn in oil prices that commenced in 2014, Lansdowne has rationalised its portfolio to focus upon appraisal and pre-development activities that offer shorter timeframes to potential cashflow and has relinquished its exploration assets.

With the recent increase in oil price, the Company will also seek very selective exploration assets in the North Celtic Sea Basin that have synergy with Barryroe.

The reason the Company exists is to explore, find, develop and monetise oil and gas deposits. The Company believes it successfully delivers on this purpose through its joint venture activities with its local and international partners.

Our strategy is to identify, acquire and work up oil and gas opportunities and then seek to farm- down our working interest through the more capital intensive drilling and development activities. We work with our joint venture partners to develop our licence areas so as to add value for shareholders. To date the Company has concentrated on high value opportunities in its defined area of activity, the North Celtic Sea Basin, Offshore Ireland. The Company is committed to maintaining its overhead at the lowest possible level whilst delivering on its stated objectives.

The Company has identified the following key challenges:

  • Additional funds may be required to maintain licence participation
  • Moving the assets forward to be cash generative
  • Delivering value through non-operated activities
  • Maintaining quality operations whilst minimising expenditure
  • Management of a wide range of risks in undertaking oil and gas activities
  • Political/societal opposition to oil and gas The Climate Emergency Measures Bill was put forward in the Irish Dail Eireann in 2018 seeking to stop the award of new oil and gas licences. However, Government Policy in Ireland remains to promote the oil and gas sector, with hydrocarbons expected to play a very important role in energy supply in Ireland for many years to come

These challenges are continually monitored by the Board and areas requiring attention are addressed where necessary.

Principle 2 – Seek to understand and meet shareholder needs and expectations

 

We communicate with shareholders through:

  • the Annual Report
  • Regulatory announcements
  • Annual General Meeting (AGM)
  • General Meetings
  • the Company Website
  • Various presentations

Copies of the Annual Report and Accounts are issued to all shareholders on a timely basis and to those who have requested them. Copies are also available on the Company’s website www.lansdowneoilandgas.com. The Company’s interim results are also made available on the Company’s website. The Company makes full use of its website to provide information to shareholders and other interested parties.

The Board reviews proxy voting reports and any significant opposition is discussed with relevant shareholders and, if necessary, action is taken to resolve any identified issues. In compliance with best practice, the level of proxy votes (for, against and votes withheld) lodged on each resolution are declared at all general meetings and in future it is the Boards intention to subsequently announce the level of proxy votes.

Shareholders are given the opportunity to raise questions at both Annual General Meetings and General Meetings and the Directors are available both before and after the meeting for further discussion with shareholders.

The CEO is primarily responsible for updating the market with developments. The Non-Executive Chairman is available to meet with major shareholders if such meetings are requested. Feedback from such meetings with shareholders is provided to the Board to ensure the Directors have a balanced understanding of the issues and concerns of major shareholders. Trading updates and press releases are issued as appropriate.

The Board receives share register analysis reports on a quarterly basis to monitor the Company’s shareholder base and help identify the types of investors on the register.

The CEO is responsible for shareholder liaison.

Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long-term success

 

The Company regards its shareholders, joint venture partners, suppliers and advisers and the Government Regulator as Company stakeholders.

Stakeholder How we Engage with our Stakeholders
Shareholders As detailed under principle 2 above, we engage and communicate with our shareholders through the Annual Report, regulatory news announcements, annual and general meetings, the Company website and various presentations. We believe that we have successfully engaged with our shareholders which has led to shareholder support for the Company.
Joint Venture Partners Management prioritises its relationships with joint venture partners and time is directed to ensuring the relationships are managed appropriately. Regular meetings and reviews are undertaken to ensure any issues are addressed promptly.
Suppliers & Advisers Given the size and nature of our business we have a small number of suppliers and advisers allowing us to actively liaise and engage with them. We also operate systems where by supplier and advisers are paid promptly. This has led to a supportive relationship between the Company and its suppliers/advisers.
Government Regulator The Company prides itself on its interaction with the Government regulator such that all licensing matters are dealt with promptly and in a professional courteous manner thus maintaining a positive relationship and leading to licence security.

The Company complies with all appropriate environmental and pollution control legislation.

Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation

 

The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through the activities of the Audit & Risk Committee, the effectiveness of these internal controls is reviewed annually.

For further details of the Company’s approach to risk and its management, please refer to the Principal Risks section of the Strategic Report and to the Risk Management and Internal Control section of the Corporate Governance Statement in our Annual Report and Accounts.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Company’s results, compared with the budget, are reported to the Board on a monthly basis.

The Company maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Company. The insured values and type of cover are comprehensively reviewed on an annual basis.

The CEO is responsible for identifying new risks and opportunities presented to the Company, making recommendations to the Board and/or Audit & Risk Committee as appropriate.

A risk register has been established and is reviewed on an ongoing basis by the CEO and presented to the Audit & Risk Committee where they consider the appropriateness of the risks identified and the mitigating action taken by the executive on a risk by risk basis focusing on those deemed most critical.

Principle 5 – Maintain the Board as a well-functioning, balanced team led by the chair

 

The members of the Board have a collective responsibility and legal obligation to promote the interests of the Company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.

The Board consists of four directors of which one is an executive director and three are independent non-executive directors.

Further details pertaining to the Board and the roles carried out by each member are set out in the Corporate Governance section of the Annual Report and Accounts.

Each Board member commits sufficient time to fulfil their duties and obligations to the Board and the Company. They attend regular Board meetings and join ad hoc Board calls and offer consultation when needed.

The Board has a schedule of regular business, financial and operational matters, and each Board committee has defined terms of reference and a schedule of work to ensure that all areas for which the Board has responsibility are addressed and reviewed during the course of the year. The Chairman is responsible for ensuring that directors receive accurate, sufficient and timely information. The company secretary compiles the Board and committee papers which are circulated to directors prior to meetings. The company secretary provides minutes of each meeting and every director is aware of the right to have any concerns minuted and to seek independent advice at the Company’s expense where appropriate.

The Board is supported by two committees, Audit & Risk Committee and Remuneration Committee. The Board does not consider that it is of a size at present to require a separate Nominations Committee, and all members of the Board are involved in the appointment of new directors.

The number of Board and Committee meetings held throughout the course of the financial year ended 31st December 2017 are set out below:

Board

Meetings (6)

Audit & Risk Committee Meetings

(2)

Remuneration Committee Meetings

(2)

DIRECTOR NAME Attended Attended Attended
Executive Director
Stephen Boldy 6 N/A N/A
Non – Executive

Directors

Timothy Torrington 6 2 2
Steven Lampe (resigned

on 21/09/2018)

6 N/A 2
Jeffrey Auld 6 2 N/A
John Aldersey -Williams 6 2 N/A

Principle 6 – Ensure that between them the directors have the necessary up- to-date experience, skills and capabilities

 

The Chairman believes that, as a whole, the Board has a suitable mix of skills and competencies covering all essential disciplines bringing a balanced perspective that is beneficial both strategically and operationally and will enable the Company to deliver on its strategy.

The Board consists of one executive director and three independent non-executive directors. The nature of the Company’s business calls for the Directors to have relevant sectorial experience. The Company’s Nomad provides the Board with updates on regulatory matters on an ongoing basis.

Additional support is provided by the Company’s retained professional advisers (lawyers and auditor) as appropriate.

External advisers attend Board meetings as invited by the Chairman to report and/or discuss specific matters relevant to the Company and the markets in which they operate.

All members of the Board and including the Company Secretary bring relevant sectorial experience in oil and gas and all have a considerable number of years of public market experience. The Board believes that its blend of relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy. Directors attend industry conferences, investor and regulatory events to ensure that their knowledge remains current.

Viscount Timothy Torrington – Independent Non-Executive Chairman

Member of the Remuneration Committee and a member of the Audit & Risk Committee.

Viscount Torrington graduated from Oxford University as a geologist in 1964. He served in technical and managerial roles with Anglo American plc and Lonrho plc. In 1975, he became managing director of the Attock Oil Company, later Anvil Petroleum plc. The latter was merged with Berkeley Exploration in 1986, and acquired by Ranger Oil the same year. In 1987, he became a Director of Flextech plc and chief executive of Exploration & Production Services (Holdings) Limited, better known as Expro, a major UK oilfield services contractor. In 1995, he became Managing Director of Heritage Oil & Gas Limited, later listed in Toronto as Heritage Oil Corporation. Viscount Torrington brings long experience of governance and public markets, and is able to empathise with the sometimes differing views of investors and the executive director.

John Aldersey Williams – Independent Non-Executive Director

Member of the Audit & Risk Committee.

John Aldersey-Williams has worked in energy since 1984. He started his career as an oil company geologist before completing an MBA. He then spent some years in investment banking, with an energy focus, before returning to the oil industry in financial and commercial roles. From 1999 to 2001, he served as finance director to Texaco’s North Sea Upstream Business Unit. From 2001 until 2008, he was a consultant active across the energy sector, before being appointed a Director and subsequently CEO of SeaEnergy PLC in 2012. He has been a director of Lansdowne Oil & Gas plc since 2012.

Jeffrey Auld – Independent Non-Executive Director

Member of the Audit & Risk Committee.

Jeffrey Auld has more than 25 years of financial and commercial experience in upstream oil and gas development and production. He is currently the President and CEO of Serinus Energy plc, an AIM listed oil and gas company. His career has involved periods working for exploration and production companies – Premier Oil, PetroKazakhstan and Equator Exploration; as well as periods spent in financial institutions – Goldman Sachs, Canaccord Adams and Macquarie. He was appointed as a Non-Executive director of Lansdowne Oil & Gas plc in September 2013.

Dr Stephen Boldy – Executive Director

 

Dr Stephen Boldy is a petroleum geologist with 38 years’ experience. He completed a B.Sc. in Geology at Bedford College, University of London in 1976 and a M.Sc. in Sedimentology at Reading University in 1977. He then moved to Dublin and undertook research for his Ph.D. at Trinity College Dublin between 1977 and 1980, being awarded his Ph.D. in 1983.

From 1980 to 1984 Dr Boldy worked as a petroleum geologist for the Petroleum Affairs Division of the Department of Energy in Dublin and then spent almost 19 years with Amerada Hess Corporation, where his appointments included U.K. Exploration Manager, Norway Exploration Manager and International Exploration Manager.

In March 2003 he joined Ramco Energy as Vice President Ireland and led the flotation of Lansdowne Oil and Gas in 2006.

Dr Boldy has extensive experience of working Irish offshore basins and the basins west of Britain and served as President of the Petroleum Exploration Society of Great Britain (PESGB) in 2004.

Con Casey – Company Secretary

Joined as a Company Secretary on 11th January 2013.

Con Casey has an honours degree in Business Management from Trinity College and is a Fellow of the Association of Chartered Certified Accountants. He has over 30 years’ experience in advising companies in the natural resources sector as well as acting as adviser to a number of publicly quoted companies and semi-state organisations. He specialises in the area of corporate finance and is a founding partner of LHM Casey McGrath, one of Ireland’s leading accountancy firms, as well as being a former non-executive director of San Leon Energy Plc and Petroceltic International Plc where he

held a Board position for 13 years. Con also acted as Company Secretary for Petroceltic International Plc for a number of years.

Principle 7 – Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

 

Given the Company’s activities and its current Board composition the Company does not currently have a formal Board evaluation process.

The Company plans to engage the services of external facilitator’s on future Board evaluations, with the initial evaluation process to take place before 31 December 2018.

An identified succession risk is the fact that the Company currently only has one Executive Director who is responsible for the day to day running and management of the Company. The Board continually evaluates this risk and plans to add further executive roles as and when the level of activity of the Company requires it.

Each director is required to offer themselves for re-election on a rotational basis in accordance with the Company’s Articles of Association. This rotation dictates that each of the current Board members is obliged to offer themselves for re-election at least once every two years.

The CEO is currently the longest serving Board member having been appointed in 2005.

Board appointments are made after consultation with advisers including the Nomad who undertakes due diligence on all new potential Board candidates.

Principle 8 – Promote a corporate culture that is based on ethical values and behaviours

 

The Board recognises that core values provide a framework which influences every level of the Company. The Chief Executive Officer takes the lead in developing the corporate culture.

Given that the Company does not have any direct employees other than the CEO it does not have a human resources function.

The Company is committed to the health, safety and welfare of employees, business partners and contractors and to minimising the impact on the environment from our business activities. Policy commitments include:

  • Conducting all our activities in a safe manner resulting in zero harm to people
  • Conducting all our activities in a manner to minimise the impact on the environment
  • Reviewing all our operations to mitigate foreseeable hazards and risks
  • Complying fully with all applicable legislation and standards
  • Promoting a culture that supports operating to the highest health safety environment and quality (HSEQ)

The Company acknowledges the importance of environmental matters and where possible uses environmentally friendly policies in its offices, such as recycling and energy-efficient practices.

Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

 

The Board provides strategic leadership for the Company and operates within the scope of a robust corporate governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and practices that operate throughout the business, and defining the strategic goals that the Company implements in its business plans. The Board defines a series of matters reserved for its decision and has approved terms of reference for its audit and remuneration committees to which certain responsibilities are delegated. The chair of each committee reports to the Board on the activities of that committee.

The Audit & Risk Committee oversees risk management and determines the terms of engagement of the Company’s auditors and, in consultation with the auditors, the scope of the audit. The Committee receives and reviews reports from the CEO and Company’s auditors relating to the interim and annual financial statements and the accounting and internal control systems in the Company. The Committee has unrestricted access to, and oversee, the relationship with the Company’s auditors KPMG. The Committee reviews the independence and objectivity of the independent auditors and meets at least twice a year.

The Remuneration Committee reviews the scale and structure of the Executive Directors’ remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements. The remuneration and terms and conditions of the Non- Executive Directors are set by the entire Board. No Director of the Company may participate in any meeting at which discussion or any decision regarding his own remuneration takes place. The Remuneration Committee also administrators the Company’s share option scheme. The Committee has access to external independent advice, at the Company’s expense, as the Company sees fit. The Committee meets at least twice each year.

The Chairman has overall responsibility for corporate governance and for promoting high standards throughout the Company. He leads and chairs the Board, ensuring that committees are properly structured and operate with appropriate terms of reference, ensures that performance of individual directors, the Board and its committees are reviewed on a regular basis, leads in the development of strategy and setting objectives, and oversees communication between the Company and its shareholders.

The CEO provides coherent leadership and management of the Company, leads the development of objectives, strategies and performance standards as agreed by the Board, monitors, reviews and manages key risks and strategies with the Board, ensures that the assets of the Company are maintained and safeguarded, leads on investor relations activities to ensure communications and the Company’s standing with shareholders and financial institutions is maintained.

The Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the executive director and ensure that the Company is operating within the governance and risk framework approved by the Board.

The Company Secretary is responsible for providing clear and timely information flow to the Board and its committees and supports the Board on matters of corporate governance and risk.

The matters reserved for the Board are:

  • development and approval of the Company’s strategy and its budgetary and business plans;
  • approval of significant investments and capital expenditure
  • approval of annual and half-year results and interim management statements, accounting policies and the appointment and remuneration of the external auditors
  • changes to the Company’s capital structure and the issue of any securities
  • establishing and maintaining the Company’s risk appetite, system of internal control, governance and approval authorities

executive performance and succession planning

  • determining standards of ethics and policy in relation to health, safety, environment
  • disclosure to the market and shareholders

Principle 10 – Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

 

The Company maintains a regular dialogue with stakeholders including shareholders to enable interested parties to make informed decisions about the Company and its performance. The Board believes that transparency in its dealings offers a level of comfort to stakeholders and an understanding that their views will be listened to.

Outcome of Votes

The results of all Annual General Meetings and General Meetings are announced to the market and disclosed on the Company Website. The Board discloses the proxy voting numbers to those attending the meetings. In order to improve transparency, the Board has committed to announcing proxy voting results in future. In the event that a significant portion of voters have voted against a resolution, an explanation of what actions it intends to take to understand the reasons behind the vote will be included.

Historic Annual Reports and Notices of all General Meetings

Annual Reports and notices of all general meetings are published on the Company website.

Committees

The roles and responsibilities of the committees supporting the Board are set out at Principle 9 above.

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