Oilex promises full review after shareholder gripes

In response to concerns raised by investors, Oilex has begun a review of both its board structure and the strategy and financing of its core Cambay asset in Gujarat, India after its successful proof-of-concept tight oil well.

Chairman Max Cozijn told shareholders at the annual meeting of the ASX- and AIM-listed company, whose broker Westhouse Securities resigned earlier this month, that the board recognised the dissatisfaction demonstrated by investors who had voted against all of the resolutions covering the remuneration report and the re-election of two non-executive directors.

He said measures had been set in train to address the concerns, including the strategic and boardroom reviews, with the progress of negotiations to be stepped up to find a commercial resolution of the Cambay Joint Venture program, with meetings currently in progress and "options being considered".

After Oilex was the first company to successfully apply proven North American drilling and completion technology to tight oil and gas in India, it raised AUD30m to finance the project, of which an AUD9.4m deferred settlement came from 10% shareholder Zeta Resources.

In response to the litigation launched by Zeta in the Australian federal courts due to a resulting dispute over payment of the settlement and counter-claims, Cozijn said that the matter was now before the court and will be strongly defended with the help of external counsel, with the company’s defence and cross claim to be delivered next month.

On the existing company structure and board participants, he added the plan was to appoint "suitably qualified and experienced" directors, reduce the current cost structure so it could "do more with less", conduct a full organisational review, as well as appointing a full-service UK stock broker.

"With delivery of the proof of concept well at Cambay, Oilex is now progressing the transition from junior explorer to producer. This transition will not be without its challenges," he said.

"Having achieved the technical proof of concept and independently certified reserves, the focus and priorities of the board and management are increasingly concentrated on the commercial, regulatory and funding challenges that commencing the next phase of production from Cambay will bring. In addition to addressing the structural joint venture funding issues that have arisen."

Shares in Oilex were down 12.9% to 0.675p at 0930 GMT on Wednesday.