€Time-consuming And Distracting Proxy Battle’: Obsidian Power Trades Barbs With Activist Investor

CALGARY – Obsidian Power Ltd. and activist investor Frontfour Capital traded barbs Wednesday over appointment of recent administrators, which the corporate says would give the Connecticut-based hedge fund management over its board.

FrontFour had launched the battle for boardroom affect a day earlier, nominating 4 administrators to the corporate’s nine-person board, however firm executives fired again saying the dispute was a distraction from reviving its fortune.

A key level of competition is Gordon Ritchie, a retired Calgary-based funding banker, who Obsidian says was appointed at FrontFour’s suggestion in December — a declare the hedge fund denies.

“We’re upset that after a number of months of trying to work constructively with FrontFour, together with the addition of Gordon Ritchie to the board at their suggestion, FrontFour has chosen to place its pursuits forward of different shareholders at a crucial time within the firm’s historical past by beginning a pricey, time consuming and distracting proxy battle,” Obsidian chairman Jay Thornton mentioned in a launch Tuesday.

Obsidian says the 4 administrators plus Ritchie would give FrontFour a majority vote on its board.

FrontFour did counsel Ritchie as a director however Obsidian was already contemplating him for a board seat, mentioned Stephen Loukas, FrontFour’s portfolio supervisor who’s nominated by his agency as a board member. FrontFour owns 6.2 per cent of Obsidian’s inventory.

“The corporate’s try to direct your consideration to Mr. Ritchie and a story of management is hole,” Loukas mentioned in an e-mail. “Mr. Ritchie then, of his personal volition, joined the Obsidian board as an unbiased director in Dec. 2017, explicitly on the idea that he was not a nominee of FrontFour.”

For his half, Ritchie sided with Obsidian and endorsed the corporate’s present technique and administration group.

“It is a difficult funding setting for all Canadian (vitality corporations), however I’m assured after I say Obsidian Power is heading in the right direction,” Ritchie mentioned in a press release.

Obsidian inventory jumped almost 14.5 per cent on Wednesday to shut at $1.34 on the Toronto Inventory Change.

The composition of Obsidian’s board has been altering since former chairman and Calgary oilpatch veteran Rick George died of leukemia final August. 

George was chairman by means of a tough interval as the corporate disclosed earlier administration group was mis-categorizing bills, resulting in a share-price collapse even earlier than oil costs started to slip in late 2014. The corporate modified its title from Penn West Petroleum to Obsidian to distance itself from the scandal, which it lastly settled in an $8.5-million cope with the U.S. Securities and Change Fee final 12 months.

Like different Calgary-based mid-tier oil producers, Obsidian has been below excessive strain to chop prices, cut back debt, streamline its operations and halt a slide in its share value lately. It has additionally struggled to stay in compliance with New York Inventory Change itemizing necessities.

In an added twist, George is the daddy of FrontFour portfolio supervisor Zachary George, who co-authored a letter to Obsidian shareholders Monday criticising the corporate’s present technique.

“The time for change at Obsidian has come,” FrontFour’s George, Loukas and David Lorher wrote in a letter to the corporate Tuesday.

Aside from Loukas, FrontFour is nominating former Chevron government Steven Evans, former ConocoPhillips government Michael Faust and coal-miner Cline Mining Corp.’s appearing CEO Matt Goldfarb to the Obsidian board.

FrontFour’s letter to shareholders says its nominees would “assist drive the required choices” to overtake the corporate’s property, concentrate on one key gentle oil formation and enhance its share value.

The hedge fund needs Obsidian to dump its older pure fuel property and its operations in two Alberta oil and fuel formations to focus solely on its properties within the Cardium light-oil formation.

“It’s our sturdy perception that our plan would lead to a worth proposition for buyers that might be valued considerably greater by the general public fairness markets and would shortly lead to Obsidian being again in compliance with (New York Inventory Change) itemizing requirements,” the letter acknowledged.

The corporate itself acknowledged the necessity for change in its launch, however mentioned FrontFour’s proxy battle is “risking the corporate’s progress.”

“We acknowledge that established order isn’t an possibility and have been pursuing engaging business alternatives to reward buyers,” Thornton mentioned. He didn’t point out what these alternatives have been.

• Electronic mail: [email protected] | Twitter: geoffreymorgan

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