I recently spoke with the Managing Director of Metgasco (ASX: MEL), Peter Henderson, just as he and the company are preparing for the upcoming 29 October AGM, when a special shareholder vote will be taken over proposed changes in directorships.
After the New South Wales government's proposal of a 2 km exclusion zone around towns and villages from coal seam gas (CSG) gas development in March, the company suspended operations and cut staff. An uncertain regulatory environment and prolonged approvals process make development difficult to plan and may lead to increased costs with less certainty of being awarded approvals.
Henderson said the company welcomed the support that the new federal government has shown, and appreciates that the new Industry Minister, Ian Macfarlane, as well as the former minister, Martin Ferguson, share the view that more CSG development is necessary in NSW. He pointed out, though, that the state government is the primary regulator in this matter, so it needs to send a message that "it understands our industry, and it wants us, and wants to support us".
The company said the decision to halt development was made to conserve funds until there is more clarity and regulations were created based on managing the appropriate risk. However, some shareholders are pushing for changing the board of directors because they feel that there was no need to stop everything since a majority of their exploration areas is outside of the 2 km exclusion zones, and that other regions outside of NSW could be investigated also.
The group is proposing three people as new directors, one of whom is Glenda McLoughlin, the former CFO, executive director and joint company secretary, who retired in February 2012.
The company board has recommended that shareholders reject the resolution of changing directors because they and the minority shareholder group representatives have not put forth any strategy to improve the company, and the change of 3 out of 5 directors would be highly disruptive to the company.
"I think every one of the shareholders are frustrated, myself included. They have all that gas in the ground, and they are frustrated by why the share price was so low. They're frustrated about the Greens and government, and now us, and that is perfectly to be expected," Peterson said.
He questioned what a new board would do differently to change the situation: "Would they go back immediately into the field, or are they going to explore overseas or in Australia? What exactly is their strategy? They haven't told anybody."
On 27 September, a meeting was held with the company and the three proposed directors to discuss their views, yet only one of the three, Mrs. McLoughlin, attended. The company asked to hear of the proposed directors' strategies and plans, and what would be done differently, and according to Henderson, she wasn't prepared to say.
He added, "We still have a tough road to go, and it's not going to turn around overnight. For change, if the shareholders are going to decide, they need to decide that the changes are actually in their self-interest."
Other companies, including Santos (ASX: STO) and AGL (ASX: AGK), have been affected by the regulations, and Dart Energy (ASX: DTE) suspended operations similar to Metgasco in March. Planet Gas (ASX: PGS) exited NSW to concentrate on its South Australia developments.
Henderson summed things up by saying, "We've got gas in the ground, a market which is improving, a lot to offer NSW, and we should be able to make a business there… we are best to hold, and keep our powder dry until then."
Foolish takeaway
At a public company, shareholders are the owners, and a majority vote can change company policy, strategies and company officials. Apart from share prices and dividends, this is when you yourself can take part in the active development of the companies you hold stock in.
This is another reason for knowing what you invest in. If you are going to buy shares of stock, then these kinds of decisions and votes are going to affect your investment. You need to understand its industry as well to compare one company to the next. Is it just the management of the individual company or are others being affected similarly? You make the final decision.
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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.
