Corporate Governance

CORPORATE GOVERNANCE WEBSITE DISCLOSURE

To the extent applicable, and to the extent able (given the current size and structure of Anglo African Oil & Gas plc ("the Company" or "AAOG") and the board of directors ("the Board"), the Company has adopted the Quoted Companies Alliance Corporate Governance Code. Details of how AAOG complies with the Code, and the reasons for any non-compliance, are set out in the table below, together with the principles contained in the Code.

Prior to the formal adoption of the Code, the Company has, for several years, operated in compliance with recommendations of the QCA, in so far as the size of both the Company and its Board permitted. For that reason, no significant changes in governance-related matters have been needed. No key governance matters have arisen since the publication of the last Annual Report.

Considering the Company's size and nature, and the geographical spread of its operations, the Board considers that the structure of the current Board is a cost-effective and practical method of directing and managing the Company. As the Company's activities develop in size, nature and scope, the size of the Board and the implementation of additional corporate governance policies and structures will be reviewed.

 

David Sefton
Chairman

The principles set out in the Code which require disclosure on the website and the required disclosure are set out in the table below.

Establish a strategy and business model which promote long-term value for shareholders

AAOG aims to increase output from the existing wells in the Tilapia Field in the Republic of the Congo ("the Congo") by undertaking workovers on the existing wells and by a drilling programme into deeper geological features, the Mengo and Djeno Sands, which Tilapia shares with surrounding fields.

The Directors intend to distribute free cash to shareholders through regular dividends, once production reaches a sustained level of 1,000 bopd and provided that oil prices are not less than US$30/barrel.

It is AAOG's intention to conduct its activities in a professional and responsible manner for the benefit of its shareholders, its employees, and the national and local communities where it operates.

Seek to understand and meet shareholder needs and expectations

As the large majority of the Company's shares are held in CREST, with the beneficial owners not disclosed, AAOG seeks to communicate with shareholders primarily by indirect methods. Announcements through RNS are as comprehensive as possible. Social media are used as a means of communication, and the Company has adopted guidelines relating to the use of social media.

The CEO, James Berwick, conducts webcasts with Q&A sessions, and he and the executive chairman, David Sefton, attend and present at investor forums wherever possible, as well as holding discussions with oil analysts, shareholders and investment managers.

It is apparent from such interaction that shareholders have several concerns, including:

  • How do the directors propose to expand operations without dilution to existing shareholdings?
    The fund-raising in June 2018 was primarily required for the Company to be in a position to cover the whole of the drilling costs for the new well, TLP-103, in the event that Société Nationale des Pétroles du Congo ("SNPC"), the Congolese state oil company, was unable to contribute its proportion of such costs. If TLP-103 proves to be a successful well, AAOG expects to be cash-flow positive in future. Further expansion of the Tilapia field might require further equity, but the Directors would expect this to be at a share price reflecting substantial gains for shareholders.
  • When will the operations in the Congo become profitable?
    Assuming that the new well TLP-103 is successful, AAOG will start operating profitably.
  • What is the position on the renewal of the Tilapia oil and gas licence?

While we are working diligently on the renewal of the Tilapia lease, where AAOG owns 56 per cent with SNPC owning 44 per cent, it is important to realise that the current licence is valid until July 2020. In February 2018, we were informed that SNPC had recommended that PK be granted a new 20-year licence. This recommendation is now going through the Congolese regulatory and administrative processes, and we believe that our significant investment in TLP-103 will be of critical importance to the finalisation of the licensing process.

Shareholder liaison is managed by David Sefton (info@aaog.com).

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

AAOG operates in the UK and the Congo. It identifies the main stakeholders in the Congo as being SNPC, the Congolese authorities and the local community where the Tilapia field is situated. The financial problems of SNPC have been well publicised, and the Company has arranged to cover SNPC's share of the cost of drilling TLP-103 by way of loan from SNPC, to be recovered from production. Strong relationships have been established with the authorities in the Congo, who have supported AAOG's plans for drilling TLP-103, which began in August 2018.

The Company has also established excellent relationships with the local community and has made substantial contributions to local welfare projects. So far as has been possible, the workforce has been recruited locally.

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

The board of AAOG is responsible for setting the risk framework within which the Company operates and ensuring that suitable risk-management controls and reporting structures are in place throughout the group.

The oil-extraction operations of the group have specific risk-management challenges, including, in particular, maintaining the health and safety of all staff and contractors working on site and ensuring that all drilling and related operations are carried out in an environmentally sound manner. These risks have been exhaustively documented and measures have been put in place to mitigate the risks to the greatest extent possible. All contractors are subject to the same risk-mitigation procedures as employees, and all health and safety measures are formalised, described in detailed manuals and explained in person to all people associated with the Company's operational activities.

The board seeks to minimise risk in the management of its operations while appreciating that the nature of the natural-resource extraction sector carries risk, because the knowledge of specific geological formations and their impact on operations may be incomplete or turn out to be incorrect. The Company uses third-party advisors to address specific issues that arise during operations where they bring complementary expertise and experience.

Maintain the board as a well-functioning, balanced team led by the chair

The AAOG board comprises a balance of independent and non-independent directors with collective, specific and complementary skills that enable the Company to manage and direct its affairs in a professional manner, with embedded corporate governance procedures that are fit for purpose.

Board meetings are held at least eight times a year and all necessary documentation is provided to the board in advance, so that they can understand the issues under review and make well-considered decisions.

The board has audit and remuneration sub-committees that are chaired by non-executive directors.

The directors devote such time to the Company's affairs as the board considers appropriate.

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

The board of AAOG maintains up-do-date skills, knowledge and experience to enable it to direct and manage the Company's operations, finances and its interface with investors, the public markets and its other stakeholders.

It takes great care to appoint managers and staff with the appropriate skills and experience, and is aware the importance of encouraging diversity among its workforce. In particular, AAOG operates in foreign jurisdictions where the recruitment of a local workforce is actively encouraged.

The board works as a team and regularly reviews its procedures and composition.

Evaluate Board performance based on clear and relevant objectives, seeking continual improvement

Current membership of the Board is as follows:

Name Role Appointed Status
David Sefton Executive chairman 25-Jul-16 Non-independent
James Berwick CEO 22-Jan-18 Non-independent
James Cane Finance director 25-Jul-16 Non-independent
Phil Beck Non-executive director 22-Jan-18 Independent
Nick Butler Non-executive 22-Jan-18 Independent
Sarah Cope Non-executive 22-Jan-18 Independent
Brian Moritz Non-executive 12-Jan-01 Non-independent

Notwithstanding that AAOG was only admitted to AIM in March 2017, this table illustrates the success of the Board in attracting a diverse and experienced membership.

In view of the size of the Board and the short period of membership for the majority of the Board, the Directors do not believe that it is practical to undertake an external or a wide-ranging evaluation of the performance of Board members. Based on an informal evaluation, the Board considers the recent performance of the executive directors to have been successful in achieving the Company's objectives for the first half of 2018.

The primary tasks of the CEO, James Berwick, have been to finalise the design of TLP-103, build a team capable of executing the drilling programme and put in place the drilling contract, all of which have been satisfactorily achieved. He has also established good relationships with local stakeholders, with a view to obtaining a new Tilapia licence. He is now focused on optimising the drilling of TLP-103.

The primary task of the Executive Chairman, David Sefton, has been to ensure that funding has been available for drilling TLP-103, which was achieved with the fund-raising in June 2018. He is also the main point of contact with the Company's shareholders and professional advisers.

James Cane's main task is to oversee the Company's administrative function and, in particular, its financial affairs. While this is an area where it is more difficult to evaluate performance, he has managed the process for completing the financial statements within the statutory time limits and supervised the Company's administration.

Succession planning remains an important issue for the Board.

The Board intends to review the performance of the team as a unit to ensure that the members of the Board collectively function in an efficient and productive manner.

All continuing Directors stand for re-election on an annual basis.

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

The Board strives to promote a corporate culture based on sound ethical values and behaviours.

The Board is aware that it operates in jurisdictions where ethical standards may differ from those in the UK, and which may, rightly or wrongly, have a reputation for corrupt practices. To that end, AAOG has adopted a strict anti-corruption and whistle-blowing policy but the Directors are not aware of any event to date that might be considered to breach this policy. The executive directors ensure that external contractors are aware of, and comply with, this policy.

The Company has also adopted a code for directors' and employees' dealings in securities, which is appropriate for a company whose securities are traded on AIM. The code is in accordance with the requirements of the Market Abuse Regulation that came into effect in 2016.

The Board is also aware that the tone and culture it sets will greatly impact all aspects of the Company and the way that employees behave, as well as the achievement of corporate objectives. A significant part of the Company's activities is centred upon an open dialogue with shareholders, employees and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives.

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

The corporate governance structures which the Company is able to operate are limited by the size of the Board, and in particular the small number of executive directors, which is itself dictated by the current size of the Company's operations. With this limitation, the Board is dedicated to upholding the highest possible standards of governance and probity.

The chairman, David Sefton:

  • leads the Board and is primarily responsible for the effective working of the Board;
  • in consultation with the Board, ensures good corporate governance and sets clear expectations with regards to Company culture, values and behaviour;
  • sets the Board's agenda and ensures that all Directors are encouraged to participate fully in the activities and decision-making process of the Board;
  • takes responsibility for relationships with the Company's professional advisers and major shareholders.

The CEO, James Berwick:

  • is primarily responsible for developing AAOG's strategy in consultation with the Board, for its implementation and for the operational management of the business;
  • is primarily responsible for new projects and expansion;
  • runs the Company on a day-to-day basis;
  • implements the decisions of the Board;
  • monitors, reviews and manages key risks;
  • is the Company's primary spokesperson, communicating with external audiences, such as investors, analysts and the media.

The finance director, James Cane:

  • is responsible for the administration of all aspects of the Group;
  • oversees the accounting function of all group companies;
  • deals with all matters relating to the independent audit.

The remuneration committee is chaired by Nick Butler and comprises Phil Beck and Nick Butler. It meets on an ad hoc basis when required.

The audit committee is chaired by Sarah Cope and comprises Sarah Cope and Brian Moritz. It normally meets twice each financial year to consider the interim and final results. In the latter case, the auditors are present and the meeting considers and takes action on any matters raised by the auditors arising from their audit.

Matters reserved for the Board include:

  • Vision and strategy
  • Production and trading results
  • Financial statements and reporting
  • Financing strategy, including debt and other external financing sources
  • Budgets, acquisitions and expansion projects, divestments and capital expenditure and business plans
  • Corporate governance and compliance
  • Risk management and internal controls
  • Appointments and succession plans
  • Directors' remuneration.

Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

Shareholders are encouraged to participate at the AGM, to ensure that there is a high level of accountability and identification with the Group's strategy and goals.

All directors were present at the AGM held on 29 June 2018. The resolutions proposed at the AGM and at all general meetings held since Admission have been passed with no material proxy votes against such resolutions.

Annual reports and notices of general meetings are included separately in the appropriate section of this website.

 

Page last updated: 28 September 2018

 
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