BUENOS AIRES, Argentina, Feb. 17, 2015 /CNW/ - LAIG Oil Investments ("LAIG") announced today that it has identified and provided further credentials of the chief executive officer for Crown Point Energy Inc. ("Crown Point" or the "Company") that it would recommend to the board and further details relating to its alternative financing proposal that has been rejected by Crown Point. LAIG also advises Crown Point shareholders to not be misled by management's deceptive statements about LAIG's ability to finance its offer.
Chief Executive Officer
As announced previously, if LAIG's proposed resolutions are approved at the special meeting of shareholders to be held on February 24, 2015 (the "Meeting"), LAIG intends to recommend that the reconstituted board of directors appoint a new CEO. Alejandra Nicoli, LAIG's proposed replacement CEO, can start immediately and would bring more than 25 years of experience managing private and public energy companies in Argentina and other countries in Latin America, mostly focused in oil & gas E&P assets. She would bring a successful track record of turning around companies, reducing costs and increasing production and revenues at oil companies.
Ms. Nicoli, who has a MS in Management from Stanford University's Graduate School of Business, currently serves as Director of Energy for LAIG, based at LAIG's offices in Buenos Aires, and was previously Director of Business Development and Strategy for Genneia S.A., the largest renewable energy company in Argentina with annual revenues in excess of US$150MM. LAIG has been an investor in Genneia S.A. since 2007 and Jorge de Pablo, LAIG's principal, has served continuously on the board since then. Among other executive positions, Ms. Nicoli was CEO of Transportadora de Gas del Norte S.A. ("TGN") from 2005 to 2007, International Division Director for Tecpetrol International S.A. ("Tecpetrol"), the energy/oil division of Techint Group of Companies, from 2001 to 2005, and CEO of Tecpetrol de Venezuela from 1997 to 2000.
TGN is a publicly-listed utility company that manages approximately half of Argentina's natural gas transportation and some import and export gas pipelines. The company had been in default for five years prior to her nomination as CEO, with a debt of almost US$700MM. As CEO, Ms. Nicoli was able to reduce costs, effectively address conflicts with unions, improve EBITDA for two consecutive years and ultimately succeed in restructuring the company's debt. Under her leadership, the company was able to improve its credit rating and pay dividends for the first time in 10 years.
As the International Division Director, Ms. Nicoli led Tecpetrol's international oil and gas operations and new business development. During her tenure, revenues increased from US$43MM to US$145MM and the company succeeded in renegotiating operating contracts and fiscal terms for an asset in Ecuador and began operations in Peru and Mexico.
During her tenure as CEO of Tecpetrol de Venezuela, that company successfully increased the Colón Block production from 5000 BOED to 12000 BOED, reduced operating costs and investment unit costs and renegotiated a key contract with Petroleos de Venezuela S.A. to increase revenues. Under her leadership, the company's cash flow turned from negative to positive and the asset value increased more than ten times (based on participating interest sold before and after her term).
As her credentials show, Ms. Nicoli is exactly the type of CEO Crown Point needs.
In addition, if appointed, Ms. Nicoli would be strongly supported on the operational side by the experienced petroleum engineer Jose Vicente Duque Endara, the current Director of Exploration & Production for Hispania Petroleum. Mr. Endara has been with Tripetrol and its successor Hispania for over 20 years as Director of Reservoir Engineering, Operations Manager, and General Manager of Hispania's operations in Argentina. Prior to joining Tripetrol, Mr. Endara was a leading executive at Petroecuador, with 14 years' experience as Head Reservoir Engineer. Mr. Endara received a Petroleum Engineering degree from the Central University of Ecuador and a Master's of Science in Petroleum Engineering from Stanford University, as well as Masters of Arts in Business Administration from INCAE.
Changes to the Current Board
Crown Point urgently needs a new board of directors to better represent the interests of the Company's shareholders. The directors must have "skin in the game", and they must appoint a new management team that has real expertise in the Argentine oil & gas industry, the ability to make sensible decisions, reasonable compensation and, as a result, the ability to create value for all shareholders. LAIG's board nominees, along with Ms. Nicoli, meet the criteria perfectly.
We, the shareholders, must put an end to the unprecedented value destruction this board and management have wrought. Their decisions are inexplicable and unjustifiable:
- consider, by way of example, the sale of the El Valle asset for a fraction of the amount at which the Company had valued that asset;
- consider the lack of transparency and incoherent strategy;
- consider the investment agreement (the "Investment Agreement") with Liminar Energia S.A. ("Liminar") and its joint actor GORC S.A. (together, the "New Investors"), about whom so little is known. LAIG believes management and the board chose to tie the Company to the New Investors due to their need to pay their exceedingly high expenses and cover financial gaps created by their poor decisions;
- consider how management and the board, only a few months before the Investment Agreement was announced, were telling the market the Company's capex plans were fully funded;
- consider that, while salaries rose, management and the board members never bought shares in the market, despite the depressed share prices, adding to their lack of accountability to the shareholders.
Poor management, poor decisions, no accountability or "skin in the game", expensive offices, stratospheric salaries unrelated to the Company's performance or stock price, little knowledge of or experience in the one and only country where the Company operates (including the failure of the CEO and the CFO to even speak the language): these are the hallmarks of this management team and the board they serve. And most astonishingly, in light of the Company's ongoing disastrous performance, management and the board have spent time and significant sums of money in an attempt to publicly vilify one of the Company's largest shareholders, which in good faith and out of concern for its investment confronted management, privately first and then publicly, once it became clear that its concerns would not be addressed. LAIG, which has invested a significant amount of capital in the Company, has had its offers of further investment rejected and has been disparaged and defamed by management and the board, who had ample opportunity to simply address LAIG's concerns.
Management and the board's conduct in this proxy contest is shameful, and yet it is an accurate reflection of how they have always made decisions. They are concerned about their jobs, and their strategy has been nothing more than to benefit from a quiet and fragmented shareholder base to entrench themselves. In doing so, they have inflicted tremendous pain on the Company's shareholders. It is sadly ironic that a management team that failed to keep its shareholders informed and whose disclosure record is questionable now desperately issues press releases vilifying LAIG on an almost daily basis.
We can only hope that if the CEO and CFO have any integrity left, they will resign from the Company should the shareholders approve any of LAIG's proposed resolutions and not claim any golden parachute they shamefully awarded themselves.
Proposed Alternative Financing
The Investment Agreement provides for the issuance of common shares to the New Investors that will ultimately represent 36.5% of Crown Point's common shares. Shares representing 19.9% of Crown Point's common shares have already been issued to Liminar, and one of the resolutions to be considered at the Meeting is to approve the issuance of the remaining common shares (the "Second Tranche Resolution"). If the Second Tranche Resolution is approved, the New Investors, about whom very little is known, will effectively control the Company. LAIG has significant concerns regarding the New Investors and believes that shareholders should ask themselves why management and the board would allow the Company to enter into such an agreement and what will happen to their investment when the New Investors take full control. Shareholders should be aware that by allowing the dilutive first tranche of the New Investors' financing in December, without asking for a shareholder vote, management has essentially "bought", at the expense of the independent shareholders, the New Investors' votes.
In light of its concerns, on January 26, 2015, LAIG formally submitted a bona fide offer to which it was willing to be bound, if accepted by the Company, to provide the second tranche of the financing recommended by management, but at a price per share 10% higher and without any governance conditions. In other words, LAIG offered to purchase the same shares as those contemplated by Second Tranche Resolution, but at a value of US$0.275 per share instead of US$0.25. In order to proceed, the offer would need to have been accepted by the Company and would have also required disinterested shareholder approval and approval of the TSX Venture Exchange. However, Crown Point definitively rejected LAIG's offer publicly and failed to enter into any discussions with LAIG or a definitive agreement to effect LAIG's proposed financing.
LAIG continues to believe that the offer that was rejected by Crown Point was superior to the financing contemplated in the Second Tranche Resolution and is baffled that management and the board view an inferior financing to be in the best interests of the Company, particularly since LAIG was not even contacted to discuss the terms of its proposed financing. LAIG included the LAIG financing resolution on its form of proxy in a good faith attempt to allow shareholders the opportunity to show management and the board their support for what it considers a superior proposal.
Nonetheless, because LAIG's offer was publicly rejected, shareholders should understand that they will not be given the opportunity to consider and potentially approve two competing financing proposals at the Meeting. As the board has rejected LAIG's offer, LAIG does not expect that management and the board will put forward the LAIG financing resolution for consideration at the Meeting. Management's rejection of LAIG's offer has deprived the Company of a superior offer.
If LAIG's nominees are elected, and the Second Tranche Resolution is rejected, as LAIG is recommending, Crown Point's new board will be able to consider, if needed, financing proposals alternative to the sweetheart financing the current board and management have entered into with the New Investors. However, upon review, LAIG does not believe that the Company would need new financing if it were run by a more efficient and cost-conscious board and management.
The Board and Management's Attempts to Mislead
In light of the board and management's continuous misleading statements, including with respect to LAIG's ability to fund any transaction it proposes, LAIG assures shareholders that not only would it have been able to fund its alternative proposal had it not been rejected by management and the board, but it has never failed to finance any transaction to which it was bound. Such statements are nothing more than the board and management's desperate attempt to disparage LAIG's reputation as an investor.
In particular, management and the board have made numerous references to LAIG's court action against Medanito S.A., as if the existence of that claim somehow impugns LAIG. Shareholders should be aware that nothing could be further from the truth. In the dispute with Medanito S.A., LAIG is the plaintiff, and only pursued the claim when it suffered damages due to the actions of third parties. Management and the board failed to fully inform the shareholders, despite their numerous press releases, that the criminal legal process in Argentina against the directors of Medanito S.A. and the commercial legal process in New York against Medanito S.A. itself have resulted in the offices of Medanito and its lawyers being searched by the authorities and a New York court granting a restraining order in favour of LAIG. LAIG's ability to fund a transaction was never at issue in its claim against Medanito S.A., despite management and the board's misleading statements to the contrary.
In addition, as management and the board know, it would be highly unusual for any first offer to include the kind of financial verification they claim they would have required to consider LAIG's alternative proposal. Shareholders should question whether management and the board sought such verification from the New Investors at a similar stage of discussions or at all. It is baffling to read management and the board's claim that LAIG has no financial ability to fund a potential equity financing when the Company refused to even enter into discussions with LAIG to prove that was the case. LAIG would have been willing to provide sufficient proof had the Company not rejected its offer outright.
LAIG recommends that shareholders vote only the GOLD proxy in support of LAIG's recommendations as the primary step towards real value creation. A completed GOLD proxy will replace any previously voted proxy. In order to be counted at the Special Meeting of the Company's shareholders, the GOLD proxy should be voted well in advance of the proxy voting deadline of Thursday February 19, 2015 at 10:00 a.m. (Calgary time). Please do not attempt to mail your proxy unless you have no other alternative.
Shareholders who require assistance voting the Gold proxy should please contact Shorecrest Group at 1-888-637-5789 or by email [email protected].
The vote is scheduled to be held in the Bonavista Room in the Westin Calgary, located at 320, 4th Avenue S.W., Calgary, Alberta on Tuesday, February 24, 2015 at 10:00 a.m. (Calgary time) and at any and all adjournments or postponements thereof (the "Special Meeting").
SOURCE LAIG Oil Investments